Hiring can often be a stressful and enormous task, but how do we know when we’ve done it correctly? Trying to measure the quality of hire without the appropriate system is like measuring a new shelf without a tape measure; you might have a rough idea, but chances are you’re not going to be spot on.
In today’s competitive job market, ensuring your hiring process works well is vital for the organization’s success. Yet, accurately measuring the quality of said hires can go out the window with the relief that comes from filling the position. If your hire turns out to be unsuccessful, you’re likely to repeat the progress. However, understanding and assessing the quality of your hires can help break the cycle.
What Is Quality of Hire?
Quality of hire simply assesses a new employee’s value across various chosen indicators. It’s a comprehensive metric that evaluates how well a new hire meets the expectations during the recruitment process and contributes to the company’s success.
Indicators typically include job performance, cultural fit, retention rates, and the overall impact on team and organizational goals, but they vary according to the organization.
Why Measure Quality of Hire?
Measuring the quality of hire isn’t simply another piece of HR red tape to tick off the list. It’s essential for several reasons:
Improving Hiring Processes
The hiring process can often be sporadic, at best. Sometimes, it works, and sometimes, it doesn’t, but some companies manage to refine their hiring to maximize their chances of success. A big part of this comes with understanding which hiring practices lead to high-quality hires and why – then replicating the process repeatedly.
Organizations can refine their recruitment strategies to attract better candidates by refining their process and directly addressing issues.
Enhancing Organizational Performance
The fact that great hires improve a company and bad hires hinder it shouldn’t come as a shock. It’s in everybody’s best interest to ensure that the candidates picked are the right ones for all or most of the time. High-quality hires contribute more effectively to the company’s goals, improving overall productivity and performance.
Reducing Turnover Rates
The average turnover rate of U.S. businesses from 2022 to 2023 was 17.3%, down from 24.7% the previous year. This means around 4 million Americans leave their jobs each month. The reasons for this are wide-ranging and can’t be simply attributed to hiring issues.
Still, it’s fair to assume that employees who are a good fit for the company are more likely to stay longer, reducing turnover and associated costs.
Optimizing Resource Allocation
Recruiting can be costly, sometimes running into thousands of dollars, depending on how it’s done and whether an external recruiter is involved. Knowing which recruitment channels produce the best hires and which are economic drains allows companies to allocate their resources more efficiently and save them money over the long run.
How Do You Evaluate the Quality of a Hire?
Measuring the quality of hire is more complex than many assume, but it can also be broken down into manageable segments. You need to begin by choosing your desired metrics. These can be anything you want, but we’ve picked seven that are relevant for most businesses.
1. Job Performance
Job performance is the most direct indicator of the quality of hire and one that employers will place the most emphasis on. Evaluating job performance allows you to measure if and how well an employee meets or exceeds the expectations and objectives of their role.
Performance metrics should include a variety of key performance indicators (KPIs), sales targets, customer satisfaction scores, or any other measurable outcomes relevant to the job.
2. Cultural Fit
An outstanding job performance is one thing, but how well do they fit into the team? Organizational fit assesses how well an employee aligns with the company’s values, mission, and work environment. Though there are certainly outliers who exceed work expectations while being a bad cultural fit, it isn’t common.
More often than not, employees who fit well with the company culture are generally more engaged, productive, and satisfied with their jobs. Cultural fit can be evaluated through employee surveys, peer reviews, and supervisor feedback.
3. Retention Rate
One key factor that affects the quality of hire evaluation is the retention rate. A higher retention rate often indicates a successful hire, as it suggests the employee is satisfied with their role and the organization; however, a high turnover could also be caused by management issues, workplace problems, and general dissatisfaction with the company.
You may have hired exactly the right person, but your work culture is off-putting too many. Retention rates can be tracked through HR records and exit interviews to understand why employees stay or leave.
4. Time to Productivity
Measuring the quality of hire isn’t simply about assessing whether you chose the right person for the job; it also evaluates what comes next. An onboarding process is when a new employee is introduced, trained, and brought up to speed within the business. Time to productivity measures how quickly a new hire reaches full productivity in their role.
If an employee reaches full productivity quickly, it indicates both a successful hire and an efficient onboarding process. Conversely, if a new employee takes much longer to acclimate than expected, it could either indicate an unsuccessful hire or a warning sign that something is wrong with your onboarding process.
5. Employee Engagement
Employee engagement reflects an employee’s enthusiasm and commitment towards their job and the organization. Again, we need to be careful not to base excessive worth on outward engagement because it may not consider individual characteristics or cultural differences.
Not everybody is the life and soul of a company, but that doesn’t mean they can be outstanding at their jobs. Engagement can be measured through regular surveys, performance reviews, and feedback mechanisms, but it should be handled carefully.
6. Peer and Manager Feedback
Feedback from peers and managers provides insights into the new hire’s interpersonal skills, teamwork, and overall contribution to the team. This qualitative data can be gathered through regular check-ins, 360-degree feedback, and performance reviews.
As with employee engagement, it’s an area you should tread carefully and consider personal differences between people. However, by speaking to those around a new employee, you should get a rough idea of who they are and how they work within the team.
7. Impact on Business Outcomes
Assessing the impact on business outcomes involves linking the new hire’s performance to broader organizational goals such as revenue growth, customer satisfaction, or innovation. This metric helps understand a new employee’s tangible benefits to the company.
We can’t expect a company’s fortune to be staked on a single employee. Still, if an individual can make a noticeable impact on business outcomes, it’s a huge win for everybody involved and a clear sign that the hire went well.
How To Measure Quality of Hire
Measuring the quality of hire typically involves a formula that combines various metrics to give a comprehensive score. Here’s a common approach using the metrics listed above:
Quality of Hire Formula
Quality of Hire= Job Performance + Cultural Fit + Retention + Time to Productivity + Employee Engagement + Peer & Management Feedback + Impact on Business Outcomes
Each component can be rated on a scale (e.g., 1 to 5), and the average of these ratings gives the overall quality of hire score.
Example Calculation
Let’s consider a hypothetical example:
Job Performance: Rated 4/5 based on performance reviews and KPIs
Cultural Fit: Rated 5/5 based on employee surveys and feedback
Retention: Rated 4/5 if the employee stays for a significant period
Time to Productivity: Rated 3/5 because of a few early struggles
Employee Engagement: Rated 4/5 because the employee has positively contributed to the workplace
Peer & Management Feedback: Rated 5/5 when everybody sings their praises
Impact on Business Outcomes: Rated 3/5 as they’ve impacted the business in modest ways
In this example, the quality of hire score is 28/35—or 4.0 overall if you wanted to reduce the figure to out of five.
What Are the Difficulties of Using Quality of Hire as a Metric?
Despite its benefits, measuring the quality of hire comes with challenges:
Subjectivity
We always need to be careful with subjectivity. Many components of the quality of hire, such as cultural fit and engagement, are heavily subjective and can vary dramatically based on individual perspectives.
Not everybody likes each other and can get on, but that doesn’t mean a black mark should be held against their name.
Data Collection
Gathering accurate and comprehensive data for all relevant metrics can be time-consuming and resource-intensive. The key point here is that if you do it, ensure that the data is properly analyzed and implemented; otherwise, it’s simply a waste of time.
Changing Job Requirements
The requirements and expectations for a job role can evolve, making it difficult to consistently assess a hire’s quality over time. A few years ago, all the talk seemed to be about an agile workforce, but recent wobbles suggest that some companies are stepping back into traditional, tried-and-tested formats.
Proper evaluation is difficult if a person’s position or operation changes in less than a year.
External Factors
External factors such as market conditions, management changes, and organizational restructuring can impact an employee’s performance and skew the quality of hire metrics. Recessions come and go, as do poor management and financial difficulties that have nothing to do with ground-level employees.
Final Thoughts
There’s no perfect way to measure the quality of a hire, so finding your own method and digging deeper is often the best way forward. The negative impact of a single bad hire can be harmful, but if that process is replicated repeatedly, the results can be catastrophic for the company. Getting the right employees is vital, but it starts with understanding how to do it and what’s gone wrong in the past.
David Garcia, co-founder and CEO of Scout Logic, is an industry leader in the bulk background check world. With his strategic acumen and expertise in the HR sphere, specifically in hiring, recruiting, legal compliance, background checks, and resume screening, he’s an invaluable asset and consultant.
David's counsel extends across the boards of ScoutLogic, YipitData, and Supplier.io, drawing from his impactful stints on the boards of Infutor and Avetta. With an extensive 25-year journey, he champions unparalleled B2B commercial leadership within data & analytics, significantly shaping the HR landscape.
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