Quality of Hire: What To Measure and When To Measure It

In Part 1 of this article series, we looked at the many reasons why your organization should measure the quality of its hires. Here in Part 2 we’ll take it a step further and get into the details of what to measure and when to measure it. Quality Of Hire: What To Measure There are a variety of approaches to measuring the quality of your hires. Here’s a list of five of the broad categories along with actual metrics you can use in each. 1. Individual Performance Metrics. Individual performance metrics help you determine if the people you hired this year outperformed those hired last year (in their job classification). Actual metrics:

On-the-job performance: Productivity, output, sales volume, customer satisfaction scores, efficiency, etc.

Number of weeks until they reach the (pre-set) minimal acceptable level of productivity
Their average bonus/pay for performance rewards (the percentage of their total salary rewarded in bonuses)
Error rates
Customer service scores
Scores on forced rankings, 360-degree feedback, etc.
Their performance appraisal scores (for similar jobs)
The number of months until they are promoted (with a lower number being better)
The number of company awards, recognitions, or nominations
Higher percentage salary increases (as a percentage of salary, where salary is related to performance)
Performance on training and assessment tests or in classes

2. Retention rates of new hires. This is a metric you can use to determine if the percentage of hires that are still with the firm after one year is higher this year than last. Actual metrics:

Compare the new hire voluntary termination rates for top performers and key jobs from one year to the next. Adjust for any “inflation” in overall industry retention rates (or compare this year’s rate to last)
Compare the new hire voluntary termination rates for all hires from one year to the next. Adjust for any “inflation” in overall industry retention rates (or compare this year’s rate to last)

3. Manager Satisfaction. This is done through surveys of hiring managers to show if there is a significantly higher satisfaction rate with the recruiting process this year as compared to last. Actual metrics. Look at hiring managers’ satisfaction with:

The quality (competencies) of the hire
The quality of the recruiter’s responsiveness to managers’ requests
Response time to manager requests
The number of hires
The job performance of the hire
The diversity of the hire
The number and severity of legal issues and problems as a result of the hiring process.

4. Applicant satisfaction. Surveys of applicants can show if there is a significantly higher rate of satisfaction with how they were treated during the recruiting process, again this year compared to last. Because rejected applicants may someday be customers, you need to ensure that they are treated well. Actual metrics. Look at applicants’ satisfaction with:

The way the recruiter treated them
The recruitment process
The firm (has the firm’s image improved as a result of the recruiting effort?)
The product (has the image of the firm’s products changed as a result of the recruiting effort?)

5. Cost of the hire. Are the starting salaries (adjusted for inflation) for this year’s hires the same or lower than last year’s? Actual metrics:

Compare accepted offers, adjusted for salary inflation, within position classifications for this year compared to last year to see if you are “over offering” in order to get candidates to say yes.

Measuring the Quality of Your Applicants (Before You Hire Them) Managers are continually asking for a higher quality of candidate, while recruiters tend to focus on the cost or the speed of the hire. But the quality of the applicant is clearly the superior factor. There are many ways to measure the quality of applicants before you hire them. You can measure:

Whether they get at least one counteroffer. If they are any good (unless they work for government or a non-profit), their current boss will give them at least one counteroffer to match yours. The very top get two.
Whether they are currently employed. In low unemployment times, if they are not currently working, odds are they are not top talent
Whether they have three offers from top firms. In high employment times, particularly if they are active job seekers, the very best have multiple job offers, at least one of which will be from a top firm. If your hires have only one offer (yours), they are not top talent, unless you live in a single employer area.
Whether your top performers know them. If your hires are any good, your top people know them. Top performers are hard secrets to keep.
Whether executive search professionals know them. Professionals you work with should have top hires in their databases.
Whether they were hard to convince. Because the best are in constant demand, they are much harder to sell. If they don’t have high expectations and they settle easily, something is probably wrong (or else you did great market research).
Whether they fit your competency profile. They have at least 110% of the competencies that your specs cover. They have skills and experiences that are not in your minimum requirements.
Whether they are gone quickly. The best are taken rapidly. If you’re slow to make a decision and they’re still around after 10 days, they are not top talent (or you are the employer of choice for the region).
Number of awards. Top performers are publicly recognized in their firms. They might also be highly rewarded in monetary terms (e.g., with a greater than 10% raise or greater than 20% bonus).
Manager satisfaction. If you survey your hiring managers on their satisfaction with the quality of the applicants they receive, you can get an idea of their assessment of the quality.
This year’s versus last. Select a random number of applicants’ resumes from this year and last (in the same job). Mix them up and have an expert anonymously select the top and bottom 20%. See whether this year’s applicants are better represented in the top category.
The source. If a current top performer referred them, odds are that they are also a top performer. Referrals consistently rate as the highest quality applicants.

Don’t Be Fooled on Applicant Quality Traditional measures of quality might be misleading. Be careful of:

Resume quality. Top performers seldom have great or even current resumes. People that are on the job market a long time have time to polish and improve their resumes. Beware many people don’t even write their own resume!
Schools attended. Top performers come from many schools. The best usually do excel at what ever school they went to. Don’t assume, check to see where your firm’s top performers actually went.
Grades. In a diverse world where many students are older or have to work over-all grades might not predict much. Grades in their major might show more. See if your current top performers had great grades first
Number of years of experience. In a rapidly changing world information and technology change rapidly so “experience” in a dated technology might mean little.

Quality Of Hire: When To Measure It Following is a list of possible quality-of-hire measures, ordered by when to measure them. As a general rule, the more powerful measures are listed first in each section. Results and output measures are always superior to other assessments. 1. Immediate measures (i.e., on the day of hire)

Did the actual hire’s resume rank in the top 25% (i.e., did it receive an A or A+) when the initial resumes were assessed/ranked?
Percentage of qualifications on final job description that this candidate met (including number of years of experience and education the hire has compared to the requisition and other recent hires).
When the initial finalists for the job were forced ranked after interviews, but prior to an offer, what rank was the actual hire among those finalists?
Did the actual hire also get offers from your top-ranked recruiting competitors?
Manager’s prediction of the quality of hire (based on a subjective comparison against other recent hires). What percentile do they forecast their performance level to be at?
Manager’s forced-ranking comparison of this candidate compared too other recent hires.
Manager’s satisfaction with the hiring process (responsiveness, cost, time, etc.).
Surveys of new hire satisfaction with how they were treated during the hiring process by the recruiter, this year compared to last.
Surveys of new hire satisfaction on how they were treated during the hiring process by the hiring manager, this year compared to last.
Time from contact about this job to hire date.
Satisfaction of the other finalists (who were not selected) with the hiring process.

2. Intermediate measures (up to six months after hire)

Output or production (quality and quantity) compared to other recent hires as well as the overall employee average after one month and at six months (e.g., productivity, output, sales volume, percentage of projects completed, customer satisfaction scores, etc.).
Manager’s subjective assessment of performance of the hire after one month and at 6 months.
Team and coworker subjective assessment of performance of the hire after one month and at six months.
Time to productivity (i.e., the number of days until the minimum expected output level is reached for a new hire).
How well new hires do on any required testing, certifications, or training, this year compared to last.
Satisfaction of the new hire after one month.
The quality of your applicants.
Legal complaints or issues.

3. Longer-term assessment (over one year)

Output and results (quality and quantity) compared to other recent hires as well as the overall employee average after one year (e.g., productivity, output, sales volume, percentage of projects completed, customer satisfaction scores, etc.)
Manager’s assessment of performance of the hire at their one-year performance evaluation.
Year-end surveys of all hiring managers on satisfaction with the recruiting process, this year compared to last.
The percentage of above-average performers who are still with the firm (excluding terminations) after one year, this year compared to last (be sure to adjust for any “inflation” in overall industry retention rates).
Customer 360-degree feedback or complaints, satisfaction, or other assessments.
Co-worker and team 360-degree feedback (or forced ranking) of new hires, this year compared to last).
Manager’s forced ranking of this hire compared to others in the same job.
Average performance appraisal (or forced ranking score) of this year’s hires versus last year’s.
Percentage of stock grants compared to other recent hires and all employees.
Number and dollar value of any “spot” and year-end bonuses (as a percentage of salary) compared to other hires and all employees.
Number of nominations/awards compared to other hires and all employees.
Number of salary increases compared to other hires and all employees.
Number of months until they are promoted or receive a grade increase (with a lower number being better) compared to other hires and all employees.
Number of lateral transfers compared to other hires and all employees.
Number of patents/ideas compared to other hires and all employees.
Cost of their salary: How do the starting salaries (adjusted for inflation) for this year’s hires compare to last year’s for employees rated at the same level of performance?

Overall Assessment of the Quality of Your Workforce An overall assessment of the quality of your workforce should be done each year. Take a step back and look at these “big” picture items:

Revenue per employee compared to your direct competitors, as a “mirror” of the quality of your people
Dollars of profit per dollar spent on people costs (this year to last, and also compared to your direct competitors)
Survey of local recruiters and executive search professionals on how you rank in quality of recruiting and hires (survey should be conducted by HR advertising or market research firms)
How you are listed on great-place-to-work lists.
How often you appear on benchmark lists for great recruiting.

Conclusion Now that you know the quality of your hires, the next steps are to identify:

The sources the best came from (so you can drop the “useless” ones)
The factors in the selection process that gave them high and low scores (so that you can drop the measures that don’t predict success)
The recruiters/managers/employees who found them (so you can reward them and use them again)

And last…change the reward system for managers and recruiters so that the quality of the hire is the main reward focus. If you have generated some numbers but are unsure how good your numbers are, try the Saratoga Institute or www.staffing.org. Both organizations specialize in HR benchmark data collection. Once you implement a quality-of-hire measure, don’t be surprised when many of the traditional things that your used to measure become irrelevant. You might also stop “feeling good” when you have filled all of your reqs, because now you also need to focus on bringing in better people that become top performers in your organization! If I haven’t answered all of your questions in this article, might I suggest that you drop by and talk to the supply chain or six-sigma experts at your firm. They are light years ahead of HR in measuring the “hard stuff” and can easily tell you what else you need to know.