Spotlight for Recruiting Professionals, February 1, 2012
When it comes to recruiting metrics, quality of hire is the ultimate measure of the success of any recruiting organization, says Stephen Lowisz, president and CEO of Qualigence International.
Traditional recruiting metrics—such as time-to-fill and cost-per-hire—focus on short-term objectives, often at the expense of long-term success.
“The metrics an organization chooses to use will impact the behaviors of those they are applied to,” Lowisz explains. “For example, if a recruiter is measured only by time-to-fill and cost-per-hire metrics, he or she will be driven to achieve these goals at the expense of candidate quality.”
Quality of hire, on the other hand, measures the impact the candidate has on the overall success of the organization.
“As recruiters, are we paid to fill seats or are we paid to get the right person, in the right seat, at the right time, and on the right bus?” he asks.
Getting it right isn’t always easy. In fact, there are several common missteps employers make when attempting to measure quality of hire. First, they misalign the metrics and their associated rewards.
“Organizations that measure quality of hire, yet compensate their recruiters based exclusively on cost and time metrics, generally have quality of candidate results that decrease from year to year,” Lowisz points out.
Another common mistake employers make is not measuring quality of hire at all due to the lack of a robust performance management system.
“For those organizations with no performance management system or other automated performance system, surveying hiring managers regarding the performance of placed candidates is a start,” Lowisz notes. “Although much more subjective in nature, it’s a place to begin.”
Still others lack the clearly defined expectations and objectives necessary to measure a candidate against.
“Without specific, measurable goals, quality becomes 100 percent subjective and is all too often skewed based on the employee's relationship with his or her manager,” Lowisz says.
To avoid these pitfalls and measure quality of hire in a way that can become most valuable to your organization, Lowisz offers the following tips:
- Secure buy-in—Ensure that hiring executives, recruiters, and HR business partners agree on the premise of quality of hire as the most important metric.
- Align quality metrics with incentive plans, if they exist—The main trigger for achieving rewards should be a minimum quality rating of the candidates placed by each recruiter and adjusted up or down based on other important variables, such as quality and cost. Be careful not to do this backwards.
- Keep it simple—However, do make sure quality of hire is based on more than an individual employee rating. Ideally, quality of hire metrics for recruiters should be based on the following three components:
- Average job performance ratings of new hires over a defined period of time.
- Percent of new hires meeting minimal expectations/job performance ratings.
- Percent of new hires retained after 12 months.
With this in mind, Lowisz offers the following formula for calculating quality of hire:
QH – Quality of Hire Rating of new hire
- Based on numerical average.
- If based on letters, such as A, B, C, and so on, convert to numbers and percentages.
PR – Average job performance rating of new hires
- What is the average job performance rating of new hires with at least six months of tenure and hired in the previous 12 months?
- For example, an average of 3.5 out of 5.0 = 70 percent
EP – Employee performance as a percentage of new employees
- What percentage of new hires with at least six months of tenure and hired in the previous 12 months are meeting expectations?
- For example, 80 of 100 are meeting acceptable levels = 80 percent
ER – Employee retention of new hires retained after 12 months
- What percentage of new hires used in PR and EP are retained at the end of each six-month cycle?
- For example, 20 of 40 new employees hired in the first six months of the year remain at the end of the year or cycle = 50 percent
N – Number of indicators used
Then, in our example:
- 70 percent (PR) + 80 percent (EP) + 50 percent (ER)/3 indicators (N) = 67 percent (QH)
Lowisz stresses that the quality of hire rating should only be cautiously compared to the ratings of other organizations.
“Acceptable ratings for each company could differ based on industry, levels of position, and other factors,” Lowisz points out. “Self-comparing quality of hire every six months to determine if quality is increasing internally is the best way to apply this most-important metric.”
Note: Steve Lowisz will be making several presentations for NACE members in the coming months. He will present “Changing the Metrics Game: Focus on ROI” workshops on March 1 in Sunnyvale, California, and on April 19 in Hoffman Estates, Illinois. In addition, Lowisz will present “Diversity Recruiting: How Do We Get It Right?” on March 13 in New York City.