The Holy Grail of Recruiting: How to Measure Quality of Hire

Quality-of-hire metrics are critical to understanding the effectiveness of your company’s hiring process but, for many, figuring out how to define the measurement is a challenge.

Best-selling author Lou Adler contends that most companies hire for efficiency and to minimize cost, which does not directly correlate to new hires’ contributions to a company’s success. “Hiring for quality is fundamentally different than just filling positions. To do it right, you have to track performance metrics like quality of hire and return on investment,” said Adler, the CEO and founder of The Adler Group, a talent acquisition training, consulting and search firm based in Orange County, Calif.

But quality of hire “tends to be a frustratingly elusive metric,” said Ji-A Min, a research analyst at Ideal Candidate, a job-matching technology company based in Toronto.

Shanil Kaderali, executive vice president of global talent solutions at San Jose, Calif.-based Pierpoint International, a global recruitment process outsourcing firm, described quality of hire as an aggregated index of relevant metrics, one primary purpose of which is to influence senior leadership to invest in the hiring process.

“The most difficult challenge after defining quality of hire is getting buy-in and agreement with your HR partners, finance and the executive team,” he said. “We want to take data and transform it into HR intelligence. This is a collaborative effort to move from efficiency metrics to effectiveness metrics tied to the success of the company.”

Adler said that by drilling down into the data, it’s possible to spot root cause problems in the hiring process and minimize their negative impact. “Even better, by eliminating these problems, a company is able to maximize quality of hire while minimizing cost and reducing time-to-fill.”

What Companies Are Doing Now

Measuring quality of hire is a process that is still evolving, and companies look at it in myriad ways. “Generally, there is no one-size-fits-all metric for quality of hire because it depends on what your priority is,” Min said. “Common quality-of-hire metrics include turnover rates, job performance, employee engagement and cultural fit measured by 360 ratings.”

Measurements such as time-to-fill and cost-per-hire are based on the speed and cost of the recruiting process and will not reveal the impact that hiring decisions have on a company’s ability to realize its business goals, Kaderali said.

He classified these popular metrics as efficiency metrics that are relevant but not truly impactful. “Efficiency metrics are the basics. Some companies can only measure these metrics, but for quality of hire to have an impact, we have to move to metrics that reflect effectiveness,” he said.

Turnover, performance reviews and hiring manager satisfaction are acceptable proxy measurements as long as you understand their limitations. “They are not quality-of-hire measures by themselves,” he said.

Companies often link performance reviews or general performance to a particular hire to measure the quality of that hire, according to Lars Schmidt, the founder of Amplify Talent, a branding and recruiting firm based outside Washington, D.C. “In an ideal world, you’d have a connection and an understanding of hires and performance over time that could be segmented by recruiter, manager and team to truly understand the impact those relationships are having on quality of hire. You could find out that recruiters are bringing in great people, but the hiring manager is not able to develop them. Or there is a department that is not able to optimize high-potentials and high-performers.”

If a company is trying to measure quality of hire, new hires are typically gauged on whether and how fast they attain certain productivity levels, on sales and revenue delivered, hiring manager surveys, and retention.

“Retention is harder to measure because there’s a lot of different factors outside the individual’s quality that can impact how long they might stay,” Schmidt said. “You can have an amazing hire and a horrible manager. That great hire will be poached by another organization and that’s not a reflection on the recruiter that brought that person in.”

How to Measure Quality of Hire

Experts agree that to effectively measure quality of hire, metrics must be calculated both pre- and post-hire. Recruitment-focused quality measures and post-hire performance quality measures are distinct and should be treated as such, Kaderali said.

Measuring prehire quality. According to Adler, when this measure is properly calculated and used, employers can focus on specific sources of hiring problems stemming from recruitment before they impact quality of hire. “Even better, it allows recruiting leaders to predict quality of hire for any recruiting campaign 30-60 days before the people are actually hired,” he said.

To calculate prehire quality, Kaderali uses measures of candidate quality, new-hire attrition, candidate assessment scores and time-to-fill.

Adler recommends looking at candidates-per-hire by recruiter and manager, sourcing mix by job, candidate quality by sourcing channel, passive candidate conversion rates, and referral rates by recruiter. “The best candidates are typically referred and, generally speaking, the recruiters who make the most high-quality hires obtain the most high-quality referrals,” he said.

The scores you end up with “must be brought back to relevant outcomes that contribute to profitability at your organization,” Kaderali stressed. “That’s the tricky part. I’ve worked with different stakeholders to conduct regression analysis to align quality-of-hire metrics with revenue, profitability and other company goals. It’s a commitment and a long-term process. The first time you do it means little, as there’s nothing to compare. After the following year, quarter by quarter, it starts having meaning once aligned to business outcomes.”

It’s easy to say “my time-to-fill is X number of days,” he said. It’s better to say “that we reduced our time-to-fill 20 percent, which got our technology and engineering teams to finish their project a quarter earlier, resulting in X dollars of savings which contributed to X amount of revenue.”

Measuring post-hire quality. Figuring out when the employee became fully productive, how he or she ranks among peers, and whether or not he or she is a cultural fit are all good determinants of whether you made a good hire, Kaderali said. For a comprehensive quality measurement, he recommended including metrics for performance, productivity, cultural fit and a 360-degree-comparison.

Some companies also include an engagement score, he said.

“In order to get an indication of how successful your hiring process is overall, your quality-of-hire index can be scaled by averaging the scores of all hires and including the turnover rate,” Min said. “Collecting the data you need to measure the metrics is the relatively easy part,” she added. “The harder part is conducting the statistical analyses that demonstrate the strategic value of your hiring decisions and determining whether your quality-of-hire metrics are aligned with critical outcomes.”