Hiring is one of the essential priorities for HR functions worldwide. C-suite executives and line managers look up to the recruitment department for hiring the right people at the right time. In this data-driven world, recruitment metrics have emerged as a top tool to assist in hiring decisions. One such key performance indicator is the quality of hire. Consistent and regular tracking of this KPI can make the hiring process more effective and productive. Apart from instituting a quality of hire definition, organisations are also trying to improve it.
Hiring is one area that is expensive as well as time-consuming. As per a Glassdoor survey in 2019, organisations spend $4000 and 52 days on average to fill a vacancy. Hiring does not lead to any direct income for the organisation. It makes effectiveness in hiring all the more crucial.
The impact of a wrong hiring decision is manifold. Firstly, bad hires can cost organisations hundreds of thousands of dollars. However, it is the drop in morale and productivity that concerns the C-suite executives more. SHRM found in a survey that a staggering 95% of 2100 CFOs responded positively to this. 35% said the morale gets considerably affected due to wrong hiring.
Almost 40% of talent leaders feel the quality of hire is the single most important metric for assessing hiring performance. However, most organisations do not have a system in place to measure this. The ones that do feel they can do better. Organisations also feel a lack of time and the absence of the right tools limit their efforts in this direction. There is a need for a standard model for measuring the quality of hire.
Quality of Hire Definition
Quality of hire is a measure that determines the value a new employee brings to your organisation. A new hire’s performance and tenure are the principal consideration points while assessing the value delivered.
A new employee takes time to settle into an organisation. Also, it may take months before the employee may become productive and start generating revenue. Thus, it makes more sense to calculate the quality of hire as long-term metrics.
Measuring Quality of Hire
The quality of hire definition may vary with each organisation. It is a good practice to define it in resonance with your leadership. It will not help in aligning the quality of hire to their priorities but also bring everyone on the same page. Apart from getting their buy-in, it will also help in formulating an effective hiring strategy.
Quality of hire is also the best metrics for assessing the performance of the hiring department. It can determine the strategic value that the recruitment team creates for an organisation. For instance, a good score on time to hire has no meaning if the quality of hire is low.
Moreover, quality of hire can also be used to determine the success of specific recruitment activities. For instance, it can determine the best sourcing strategy and vendors.
Organisations need to be wary of a few aspects while calculating the quality of hire. For instance, adding the records of high performers to this data may skew the results. A more effective calculation is to assess how many new hires have turned into high performers.
While establishing the quality of hire definition, here are the factors that may be considered.
- Performance reviews
Most organisations depend upon appraisals to assess the performance of their employees. Although it seems good in theory, we all know the limitations of a standard rating system. Firstly, a lot depends upon the subjectivity of the manager. Unfortunately, the relationship between a team member and a manager may also skew the rating. Secondly, a lot of organisations do not include new hires in the current performance cycle.
To get a clear picture, the hiring team can devise a separate scorecard to evaluate the performance of new hires. The managers can be asked to rate the new hire’s performance on a scale of 1-10. A simple ranking system like this can rightly point at the performance of a new hire. It may also help to add the goal-setting process in onboarding to formalise the process.
An employee can deliver real value only after spending considerable time at an organisation. However, it may not give the correct results in isolation. It happens because several factors come into play. A new hire may leave the job because of some differences with the manager. It is also possible that the new employee may not get everything as was promised.
Thus, it may make more sense to consider the tenure of high priority positions. Alternatively, the turnover rate of top performers can be viewed for a different cut.
- Cultural fit
To hire a star employee or to close the open positions, recruiters can act under pressure. Hiring an employee who is not the right organisation-fit can lead to several problems. Firstly, the new hire will not be able to deliver at the job. Secondly, the disengaged employee may impact the spirit of those around him.
Informal meetings with the new hires may help in determining if the hiring decision was right. Secondly, line managers and can peers can also give useful inputs. A 360-degree review after a year of joining may help in this regard.
- Ramp-up time
In simple terms, the time a new employee takes to become productive is defined as the ramp-up time. It doesn’t necessarily have to be six months or a year. It may depend upon the organisation’s priorities, role, and business.
An organisation can evaluate the employee lifecycle of its employees to understand the average ramp-up time. Apart from assessing the quality of hire, this data can help in other areas as well. For instance, the HR department can focus on reducing the ramp-up time and launch initiatives in the direction.
All these factors can be combined into one single number to represent the quality of hire definition.
The benefit of using this formula is that it will give a comprehensive view. For a result in percentage calculate all these factors on a scale of 1-100.
How to improve the quality of hire
The process of improving the quality of hire is a complex one. However, organisations can achieve it by tackling one issue at a time. It should start by collecting the right data from the right sources. Also, the way forward should be to align the hiring practices with the intended performance.
- Move to performance-based hiring
Most organisations use the traditional method of hiring. The recruiters tend to define the job as skills and competencies. Not only is it hard to assess candidates on these variables, but it also does not give them a clear picture of the job. For instance, a job description for a marketing manager would contain 5-6 years of experience and an MBA degree. Aligning it to performance would mean mentioning something like launching a new product or increasing the market share of the product.
- Comparison of pre-hire and post-hire data
Data can give crucial insights for improving the current processes. The recruitment department may be using psychometric assessments, interviews and other tools to identify the right candidate. Recruiters can compare the results of these assessment tools with the post-hire performance of the candidates. If the correlation is not satisfactory, it is an indication that the tools are not giving the desired results.
- Reducing the workload of recruiters
At times, recruiters are under immense pressure to fill the open positions. However, they end up spending significant time on transactional work like scheduling meetings and negotiating with the candidates. They may not have the bandwidth to focus on other aspects of their jobs.
Technology and AI can effectively resolve this situation. These tools can automate a significant part of a recruiter’s job. For instance, technology can be used to screen and shortlist candidates from a large pool.
Impress is one such solution that can greatly enhance the quality of hire. The chatbots offered by Impress are useful in first-level screening of the candidates. The chatbots are customisable, and recruiters can define the shortlisting criteria for each position. The fact that it can be administered on any number of candidates adds to its appeal. Moreover, it can be linked to video interview platforms for automated screening of the candidates.
- Aligning line managers
Like any other HR initiative, it is difficult to enhance the quality of hire without the support of line managers. As a first step, develop a mutual understanding with the line manager about the quality of hire definition.
It may also help to share interviewing tips for better hiring practices. Including performance discussions during onboarding will also help in setting a benchmark.
Measuring the quality of hire is an important metric for improving the effectiveness of hiring. Hiring the right people who match organisational values will not only enhance their productivity but also increase the retention rates.