Many leaders are concerned with quality of hire these days and for good reason: we've seen spikes in candidate ghosting, no shows on day one, early attrition, and poor candidate fit in the last few years. But "quality of hire" can be an annoying buzzword that people like to throw around. Complicating matters, TA leaders often hesitate to track it because they feel they can't possibly 'own' it - so in that void, organizations are left with little data that speaks to: How good are the people we hire? How often do they start, stay and perform well?
The purpose of this article: to help you truly understand what “quality of hire” means, how to track it, who owns it, and the ramifications for talent acquisition and talent management operations and outcomes.
Too many companies fall into the trap of viewing quality of hire as merely what the hiring managers think of the recruiting process and whether they were pleased with the quality of candidates presented to them. Alternately, they may think of quality of hire as the retention rate of new hires within a 90-day period or some other arbitrary amount of time. If a candidate makes it through that stage, then quality of hire is strong, they may assume.
In reality, quality of hire is neither.
We define Quality of Hire as the level in which a person in a new role (whether a promoted employee or external hire) contributes to the business over time and across these four measures:
- Retention – The length of time an employee has been with the company is a ticket to measuring quality of hire, as the employee should be in place at least two years to begin to understand they value they bring. If an employee quits (for any reason), there is nothing more to measure.
- Performance ratings – Performance ratings are a critical data point for measuring employees. Even when such processes and ratings are imperfect, they are likely imperfect throughout the organization, thus creating a generally fair apples-to-apples calibration of talent.
- Potential ratings – Assessments of potential success in advanced positions in another valuable data point when striving to measure quality of talent over time.
- Promotion history – Understanding how an employee has progressed in terms of promotion and salary history within the organization will provide yet another data point about the value they contribute to the organization.
By measuring quality of hire in this way over a period of time (e.g., at least two years), a company can understand what makes a good hire – and adapt their talent acquisition strategy to improve on their track record. This includes identifying the sources of hire that yield the highest-performing employees.
But improving quality of hire is dependent upon first measuring quality of hire.
Here's an example of how we approach this measurement. It's important to note that we prioritize, and begin with, the measurement of Quality of Hire for a group of employees currently in a job family or position that the company deems most critical to creating future enterprise value.
The need to measure, and ultimately improve, quality of hire is driven by the fact that most companies build business value through their intellectual capital – the knowledge workers who build brands, proprietary knowledge and more. When such critical talent leaves, the value of the business can decrease. And with turnover on the rise, it is more important than ever for companies to ensure they hire the right people – particularly into mission critical roles or functions - when given the opportunity to do so.
For these reasons, the ability to measure quality of hire is necessary to the hiring of consistently high-performing talent, and also critical to showing the return on talent acquisition investments. Recent research shows that 85 percent of companies that do measure quality of hire believe doing so has a positive impact on hiring quality. When companies focus on this metric, they can better understand the strengths and future potential of their employees and identify the characteristics they should look for when hiring new talent. The result is an optimized hiring process for identifying the people who can elevate intellectual capital and drive business value for the company.
Without a doubt, there is a link between talent acquisition and business success. The challenge in making that connection, however, lies in the ability to measure quality of hire.
As the talent a company employs increasingly serve as its biggest differentiator, understanding how they contribute to organizational success is essential to maintaining competitive advantage. And that’s what all of the buzz should be about.
