Unlocking the Quality of Hire Conundrum

You’ve no doubt heard this old expression more times than you can count: “If you find yourself in a hole, stop digging.”

Sure, OK. But what if you don’t realize you’re in a hole in the first place? In other words, what if your hiring practices—as an example—are actually missing the mark when it comes to bringing in the type of people who will help your organization soar? Even worse, what if they’re bringing in people who are doing just the opposite?

Judging by a recent survey, many companies aren’t tracking the quality of their new hires at all. In many cases, the survey finds, it’s because they don’t know where to start.

“It’s a process that often feels overwhelming at first,” says Madeline Laurano, founder of Aptitude Research Partners, which conducted the survey.

The ARP survey finds that quality of hire is much on the minds of corporate leaders these days: Over 60% of companies cite identifying quality hires as the top challenge they’re facing this year. However, only 26% of companies have a formal methodology for defining quality of hire. One in three say they would like to track quality of hire but aren’t sure where to begin.

The effort pays off, according to the study: Companies that improve quality of hire are three times as likely to see an improvement in first-year retention and three times as likely to see improvement in first-year performance than companies that don’t.

However, a number of things tend to stand in the way of companies that attempt to measure quality of hire, says Laurano. A main one is the oft-contentious relationship between recruiters and hiring managers, she says.

“Hiring managers often aren’t working with TA the way they should be,” she says.

A recommended first step is a conversation between hiring managers and talent acquisition on what constitutes a great hire at the company, says Laurano.

“It’s important to ensure that everyone’s in agreement on what makes someone ‘great’ at a particular organization,” she says.

Indeed, the study finds that 54 percent of companies say they do a better job of tracking quality of hire when there’s collaboration between talent acquisition and hiring managers.

One of the key steps to determining quality of hire is recognizing the difference between that and “quality of candidate,” says Laurano. Candidate quality is typically determined by a person’s performance at their previous jobs. Quality of hire, meanwhile, typically measures things like first-year retention, performance and fit. A crucial measure, of course, is hiring manager satisfaction with the new hire’s performance, she says.

By establishing a formal methodology on what constitutes a quality hire, companies can create a consistent way to identify and retain good employees throughout the organization.

“When there isn’t a formal methodology, decisions end up getting made that don’t provide for that quality of hire,” says Laurano.

The Difference Between “Good” and “Great”

Tom McGuire agrees that it’s important to measure quality of hire—but the main focus should be on key employees.

“My view is that it’s most important to do this for jobs that contribute a lot of intellectual capital to a company,” says McGuire, managing director of consulting firm Talent Growth Advisors.

The average company’s market value is based primarily on the intellectual capital it owns, whether it’s brands, patents or technologies, he says. Certain roles within a company contribute directly to that intellectual capital—and in those roles “that’s where the difference between good and great is dramatic,” says McGuire, who co-authored the book Talent Valuation: Accelerate Market Capitalization Through Your Most Important Asset.

When it comes to such high-value roles, he says, studies done by Gartner and others show that the difference between “average” and “great” is a factor of 12 or more. In other words, filling these roles with great people will likely have a huge impact on the organization.

In terms of measuring quality of hire for high-value roles, McGuire says the first step should be consensus among company leaders as to what constitutes a high-value role in the first place.

“Normally, if you get the senior company leaders together and give them 30 seconds to answer the question, you’ll get responses like ‘sales leader,’ ” he says. “But if you give them 30 minutes to think about it, you’ll often end up with different answers.”

HR should also carefully track performance data for high-value roles, monitoring things like promotions and retention rates.

Many ATS products come with capabilities that let HR track the sources of high-quality hires. By combining performance data and source-of-hire data, HR should be able to get a good sense of what’s working and what isn’t with respect to attracting and keeping top talent in key roles, says McGuire.

Measuring Hiring-Manager Satisfaction

At iCIMS, a fast-growing HCM technology vendor, the company carefully tracks new-hire job performance along with hiring manager satisfaction, says Amy Warner, director of talent acquisition.

“We’re always tracking the performance of new hires over time—this gives us updates on an employee’s general happiness, successes and areas of opportunity in real-time,” she says.

Warner cites the company’s onboarding program as a strength. New hires at iCIMS are provided with a 90-day plan that outlines their specific objectives and the metrics the company uses to track progress and productivity. They’re also given information on career advancement and set up with formal check-ins with their manager. The goal, she says, is to help minimize the risk of losing top performers while enabling the company to determine quality of hire from the start.

Warner also measures net promoter scores that are included in hiring-manager surveys. The surveys include questions such as, “If given the opportunity again, would you hire this person to iCIMS?” and “If given the opportunity again, would you hire this person for this role?”

“The results provide us with honest feedback that we can use to inform future hiring decisions,” says Warner.

When it comes to helping companies measure quality of hire, the HR tech vendor community needs to do more, says Laurano.

“We’re starting to see more vendors out there thinking strategically about this to help companies do a better job on this metric,” she says. “But there’s definitely more work that needs to be done, and more education that needs to happen.”