The Great Resignation is having a huge impact on the business world. Many employees are resigning in search of more fulfilling jobs and a healthier work-life balance. In fact, as of this year, a record 4.5 million employees in the US have quit their jobs. As a result, businesses must re-evaluate their recruitment strategies in order to attract and retain top talent. Part of this involves measuring and tracking more strategic metrics to ensure they have the level of quality retention they need to build a strong organization. And one such metric is quality of hire.
Although most employers now appreciate that quality of hire is essential for building a solid workforce, the metric itself is still a bit of a mystery. It is also notoriously difficult to measure, which puts a lot of companies off using it.
We’re here to change this.
Join us as we explain everything you need to know to understand, measure and improve your quality of hire.
Table of Contents
Table of Contents
Quality of hire definition
Quality of hire, also known as QoH, is an HR KPI used to measure the value that a new hire brings to an organization. It is now considered to be one of the most insightful metrics used for quantifying how much a new employee contributes to the output of a business compared to pre-hire expectations.
The measure is based on a variety of indicators, including retention levels and employee performance, satisfaction and engagement levels. It’s important to take into account both pre-hire and post-hire metrics. For example, pre-hire might include people analytics measurements such as new-hire attrition, time-to-hire, and candidate assessment scores. Post-hire, in turn, is more focused on employee performance, time to productivity and employee assessments relating to engagement and satisfaction. All this gives you a fuller picture of the quality of your new hires and the impact they have on your business.
Essentially, your quality of hire serves as a direct reflection of both the quality of talent that you are attracting to your business, as well as the overall effectiveness of your recruitment and talent acquisition processes. In other words, if you are hiring the right people for the right roles in order to meet your long-term business objectives. And this is vital for staying ahead of the competition, boosting revenue per employee, and attracting the talent you need to succeed in your organization.
Why should you measure quality of hire?
Measuring the quality of your new hires is a highly effective tool for calculating the return on investment of your hiring process. It’s also a great way to monitor a new employee’s performance to determine whether or not they are meeting expectations. If you don’t measure your quality of hire, you could be wasting time and money on new recruits who don’t generate the level of contribution you need to succeed as a business.
Measuring your quality of hire is also a great tool for helping you spot any potential issues within your talent acquisition and hiring processes. This gives you an opportunity to make improvements where needed so that you can offer the best possible candidate experience and attract valuable, productive, and loyal employees to your business.
Benefits of measuring quality of hire
Here are a few other specific benefits of regularly measuring QoH in your business:
- Employee retention increases. This is because you gain valuable insights that help you improve your recruitment funnel so that you hire the right people for the job. This is especially important given the record turnover rates many industries are experiencing these days. Plus, the lower your turnover, the less you will have to invest in other labor costs such as training and workforce planning.
- Employee engagement is boosted. Another effect of improving your hiring practices is that you are more likely to recruit candidates who are a better fit for your organizational culture. And the more pleasant the environment you are able to provide, the more motivated and engaged your workforce will be.
- Job satisfaction improves. By making smarter hiring decisions, you are also more likely to hire candidates who are a better fit for the specific roles you are trying to fill. This means that your employees will be more satisfied with their jobs, making them more likely to stay with your company in the long term.
- Productivity levels rise. The more engaged and satisfied your new hires are, and the better aligned they are with their roles, the more likely they are to become productive members of staff.
- A more desirable corporate culture. The more you are able to find the right employees with the right skills and values, the easier it will be to build a productive culture and environment. And this, in turn, will help you attract even more quality talent to your business.
- Improved business output. Above all, measuring and improving the efficiency of your recruitment and talent acquisition processes helps you onboard the talent you need in order to drive better business outcomes.
Why is quality of hire so difficult to measure?
There are a number of reasons why quality of hire is so difficult to define and measure. Above all, it’s because quality is subjective and difficult to quantify.
Generally speaking, though, there are five main challenges that you may encounter when you try to measure QoH:
- The definition of a quality employee differs across business sectors, industries, individual organizations, and, most importantly, job roles. Make sure you establish what’s important for your specific business.
- You might also find it difficult to find a definition of quality that all your different stakeholders agree with. For example, your board members might have a very different definition of quality and its impact on business than your managers. Make sure you consult all stakeholders during the definition stage.
- Time is another important factor, as you can’t really get an accurate picture of the quality of a new hire until they have been at your organization long enough for you to measure their performance levels. Make sure you only measure your indicators once a new hire has been at your company for a defined period of time.
- Your culture has a major impact on whether or not an employee is a good fit. But how do you measure culture? Do you have a clear understanding of who you are as a business and the EVP you are able to offer new recruits? Many organizations struggle with this.
- Finally, employee assessments, such as performance reviews and 360s, are subject to rater bias. This can sometimes make it difficult for you to objectively evaluate a new hire’s performance and determine how well they are settling in.
How to measure quality of hire
The first step is defining what quality of hire means to you. The second step is working out how to measure quality of hire in your business. This metric is much harder to measure than more traditional metrics like time to fill. In fact, measuring quality of hire is notoriously difficult to measure. This is mainly because quality is such a subjective term: it means different things to different people.
Let’s take a look at how you can overcome these difficulties and effectively measure your quality of hire.
Track the right metrics
The most important thing to ensure when you measure your quality of hire is that you are tracking the right metrics. There’s no right or wrong here. The right metrics will depend on how you define a quality hire. Some companies might use KPIs like employee retention, engagement and performance. Others might rely more on ramp-up time and the percentage of new employees who are promoted. However, generally speaking, the most common quality of hire metrics are usually:
- New hire performance. This is one of the most commonly used metrics for measuring QoH. Performance metrics might translate as sales quotas, or customer satisfaction ratings, for example.
- Turnover and retention. These KPIs can help you identify if there is an issue in your hiring process that’s impacting your QoH. However, keep in mind that high turnover might be down to other factors, such as ineffective management practices.
- Engagement. Employee engagement can also give you valuable insight into how happy and motivated your workforce is, especially when it comes to new hires. Although engagement surveys are subjective to a degree, they can provide you with a wealth of feedback about your employee experience. The same goes for exit interviews and general 360 performance reviews.
Use the right formulas to calculate your QoH
There are a few formulas you can use to calculate your quality of hire. The right formula for you will depend on how you define quality in your business.
For example, if you decide to use the indicators we discussed in the previous section, then you could use the following formula to calculate QoH:
QoH = (New hire performance + new hire engagement + retention rate) / 3
= (80% + 85% + 90%)/3
= QoH of 85%
You can also measure your overall QoH using the QoH index. This index reflects the overall quality of hires in your company over the past year. This can help you identify any patterns that might suggest that there is an issue with your hiring or onboarding processes.
For example, the following formula takes into account the average QoH of all new hires and the new hire retention rate:
QoH = (Average QoH + new hire retention rate) % / 2
A common variation of this index might be:
QoH = (PR + HP + HR) / N
PR: Performance rating of all new company hires
HP: Percentage of new hires that ramp-up within a determined period
HR: Your retention rate for the year
N: The number of indicators you are using (in this case, N=3)
QoH index = (PR + HP + HR) / 3
= (70 + 80 + 90) / 3
= QoH index of 80
Quality of hire example
Generally speaking, employees who add value to your organization tend to be continuous top performers. Underperformers and employees who leave the organization shortly after they are contracted do not add value. But the formula for calculating QoH isn’t always as straightforward as measuring retention and performance levels. Quality of hire is a subjective concept. This means that the formula that you use will depend on your definition of quality and the metrics you use to measure it.
For example, to calculate the overall success of your hiring process, you can use this formula:
Overall QoH (%) = [Avg. Quality of Hire score + (100 – Turnover Rate)] / 2
If you’re more interested in the quality of individual new hires and their time to productivity then you can use this formula:
Time to Productivity Score = (Number of Days to Full Productivity / Job Benchmark) x 100%
Or if you struggle with high turnover, you may want to include retention/turnover rate in your formula to tailor it to your organization’s unique needs.
How to improve your quality of hire
Once you’ve defined a process for regularly measuring your quality of hire, you need to implement strategies for improving the metric over time.
Here are a few strategies you might decide to implement to improve your QoH:
- Make sure that you have clearly defined what a quality hire is, and that you are tracking the right indicator.
- Define clear objectives for each role in your company. That way, new hires will understand what’s expected of them. A well-written job description is a good place to start.
- Train your managers so that they know how to coach and motivate new hires and provide support when needed.
- Send out regular employee satisfaction and engagement surveys to keep your finger on the pulse of your employee experience.
- Ensure you regularly communicate your metrics to your entire company
Ultimately, the best way to improve your quality of hire is to create an effective recruitment process. It is also important to track the right data. That way you can understand which new hires are adding value.
Let’s look at these two points in a bit more detail.
Improve your recruitment process
Your recruitment funnel is the first stage in your candidate experience. This means it is vital to get it right. Make sure your recruitment processes run as smoothly and efficiently as possible. This will help you find the right candidate for the job every time. After all, the last thing you want is to hire someone, only for them to leave your company after a few months. In fact, many issues with new hire quality can often be traced back to an ineffective recruitment process.
Firstly, you should aim to streamline your recruitment processes. For example, you could speed up your screening processes with intelligent automation. You could also use technology to generate the HR reports you need to access the right metrics. HR templates can be another great tool for helping your recruitment processes run more smoothly.
Make sure all your hiring managers are on the same page, too. The need to understand your definition of a quality hire so that they know what to look for. Also, make sure you train them in best practices for interviewing. For example, explain the benefits of using interview scorecards to standardize the process.
Finally, you also need to focus on creating a collaborative hiring process. In other words, your hiring managers need to work with your departmental managers during the recruitment process. Specifically, they need to collect their input so that they understand what the right candidate should offer. The right candidate needs to have the right skills for the role. However, they also need to fit into your organizational culture.
Remember, the more seamless your processes are, the more time your HR staff will have to focus on finding the right candidate.
Collect the right data
You need to make sure you are collecting the right data so that you can effectively measure your quality of hire. This means analyzing both pre and post-hire metrics.
Pre-hire data might include:
- Scores from psychometric assessments and job interviews.
- Grades on resumes that are collected through an AI screening software solution.
Post-hire data might include:
- Manager satisfaction ratings
- New hire engagement ratings
- Feedback on the hiring process (from both managers and new hires)
- Manager feedback on performance reviews
- 360 surveys asking managers, peers and team members about a new hire’s culture fit
- Objective data relating to productivity, retention levels, diversity metrics, number of promotions, etc.
How technology is improving quality of hire
One of the biggest barriers to measuring quality of hire relates to a lack of technology. The technology you use to manage your workforce analytics has a direct impact on the level of insight you gain over the quality of your new recruits. Thankfully, these days there are a number of solutions that make it easier for you to collect real-time feedback. This includes AI screening and selection tools, technology for distributing surveys on employee engagement, and solutions for managing performance reviews. All this makes it much easier for you to measure and monitor your quality of hire metrics.
For example, a hiring dashboard can help you centralize all your data so that you can make better, more informed hiring decisions. Being able to see all of your essential HR metrics at a glance can help you quickly identify problems and trends that occur throughout the hiring process. If you’re not sure where to start with this, check out our hiring dashboard template to help you visualize the hiring process from start to finish. This free KPI template can also be a valuable tool for defining the metrics you need to track in order to measure your QoH.
You also need an HR analytics software solution with a user-friendly HR dashboard so that you can track, collect, interpret and analyze the right KPIs. This makes it much easier for you to access real-time data and create effective strategic benchmarks in order to create a motivated and engaged work environment. And this, essentially, is the key to improving your quality of hire.