April 28, 2023

How to Measure Quality of Hire

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Tags: HR

HR professionals often debate the best way to measure quality of hire to effectively determine a new employee’s contribution to the business: Is it purely a qualitative measurement? Can we measure it without bias? Can we attach numbers to it?

Depending on your business, the way you measure quality of hire may be very different from another company’s. However, with advancements in both HR and recruiting software, it’s easier for companies to attach numbers to a previously subjective metric like quality of hire.

With these numbers in hand, quality of hire can help you improve recruitment and training processes as low scores indicate your talent is not adequately meeting the company’s expectations for the role.

Check out our performance management and HR software guides to start calculating your employees’ quality of hire.

What is quality of hire?

Quality of hire is an HR metric that measures the value a new employee brings to the organization or how much they contribute to realizing a company’s overall objectives. Another way to understand quality of hire is by comparing it to other recruiting metrics. While a majority of recruiting metrics measure the efficiency of the recruitment process, quality of hire measures its effectiveness: Did the process reap a great hire?

How you measure quality of hire can differ by company as well as by internal stakeholders, such as HR teams, managers, and executives. As a result, quality of hire measurements vary drastically, from a simplified employee performance score to complex calculations involving several variables.

To obtain an accurate understanding of new employees’ value to the company, most companies wait to measure quality of hire until long after employees have adjusted to their roles following onboarding. However, companies can measure an employee’s quality of hire at different points in time. For instance, measuring it at 30 days, 60 days, 90 days, semi-annually, or annually helps companies create benchmark data for future comparisons.

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How can you measure quality of hire?

Companies can rely solely on any of the variables above to measure the quality of hire; however, in isolation, these variables do not adequately represent an employee’s total contribution to the organization. The formula below allows companies to calculate this metric based on the variables they prioritize most:

Quality of hire

=

[(Variable 1) + (Variable 2) + (Variable 3) … ]


Number of variables*

*Note: all scores should be out of 100 or represented as a percentage. All variables should also represent the same time period.

Example
Let’s say a company wants to base its quality of hire metric on the employee’s job performance, ramp-up time, engagement, and values fit scores:
  1. Performance appraisal: 92/100
  2. Ramp-up time: 85/100
  3. Engagement: 97/100
  4. Values fit: 94/100
First, add the four scores: 92 + 85 + 97 + 94 = 368. Then divide this total by the number of variables (four, in this example): 368 / 4. The quality of hire score in this example is 92.

It’s essential to measure quality of hire among multiple employees in the same role to create a benchmark for comparison, as acceptable values in each position are different.

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What variables affect hiring quality?

Companies typically use job performance, productivity, ramp-up time, retention, engagement, values fit, and pre-hire metrics to calculate quality of hire.

To determine the best approach for your company, find an employee who exemplifies a quality hire for each role. Then, reverse engineer the process to understand what variables impacted their success in your organization.

Be aware of any unconscious bias when developing your quality of hire metrics. For example, placing too much emphasis on quantitive performance metrics means companies miss out on the qualitative measures of a great hire, such as inventiveness or collaboration.

“[Bias could] influence the hiring manager to provide higher ratings to [employees] similar to the rater,” explains Katie Boudreau, HR and operations manager at CallerSmart. “The ratings may have excessive leniency or severity because of several personal or professional causes.”

For a company to grow, let alone avoid a lawsuit for discriminatory hiring practices, quality of hire should successfully measure an employee’s contribution while promoting hiring practices that foster diversity and inclusion.

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Job performance

Most companies use performance appraisal scores in some respect to measure quality of hire, according to data in SHRM’s 2022 Talent Access Report. To quantify job performance, companies can use performance review rubrics to track the successful completion of particular key performance indicators (KPIs).

For example, Boudreau uses performance KPIs as just one aspect of measuring her employees’ quality of hire. “The basics include whether the candidate has been successfully fulfilling [their] monthly targets or sales quota or if an individual’s customer satisfaction ratings are high,” she says.

Although job performance is undoubtedly an important quality of hire aspect, it is only one piece of the puzzle. Job performance does not necessarily measure the employee’s tenure in the role, their engagement with the work, or their fit within the broader company.

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Ramp-up time

Ramp-up time, also known as time-to-productivity, measures the time it takes an employee to reach full productivity within their role, starting from their hire date. Ramp-up times vary for different positions. For example, a line worker’s ramp-up time may only take one to two weeks compared to a new chief financial officer’s two to four months.

Additionally, what constitutes “full productivity” in a role also varies. Generally, however, the faster companies can get new hires acclimated to their new roles, the faster they can start positively affecting the company’s bottom line.

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Productivity

Productivity measures an employee’s output over a certain timeframe. Compared to job performance and ramp-up time, productivity measurements are not limited to the employees’ first few months of hire. They also do not encompass feedback or career development goals that could be a significant part of performance appraisals but have little to do with employee output.

Companies can measure productivity by the percentage of goals achieved or other KPIs. For example, a customer service center may quantify productivity by the number of questions answered in an hour; meanwhile, a sales team may measure it by the number of new sales made in a month.

However, productivity is only one aspect of measuring quality of hire as productivity does not always factor in “quality.” How many of those customer service center calls resulted in satisfied customers? How many of those sales resulted in long-term, revenue-generating clients? Companies that equate productivity with quality miss out on a critical component of the new hire’s contribution to the business’s success.

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Retention

Retention measures the percentage of employees who remain at a company over a specific time period. Typically, the longer a new hire remains in the role compared to others, the more time they contribute to the company’s success.

Companies may have to compare their new hire’s retention to historical retention and turnover rates in similar roles to understand whether the new hire is staying longer. Moreover, while retention covers how long an employee stays in a position, it does not adequately represent the quality of work the employee produces.

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Engagement

Engagement measures a new hire’s satisfaction with their job, company, and recruiting and onboarding process. Usually, companies gather this information through engagement surveys. While these surveys can include qualitative data to improve company processes, companies can easily compare the quantitative measures from these surveys to employees in similar positions and historical data.

By comparing the quantitative data, companies can determine whether new hires are on the right track to becoming quality hires, if the company could be doing more to support new employees, or if there is a mismatch between employees’ and companies’ role expectations.

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Values fit

Values fit measures how well a new hire adheres to and enriches core company values. For instance, a quality new hire could demonstrate the company’s value of “honesty” by challenging long-held company processes and suggesting new, more efficient procedures instead. Through the employee’s feedback, the company could improve their productivity and efficiency while still supporting diverse viewpoints and living up to their values.

Most companies use 360-degree feedback surveys from managers, peers, and customers to measure a new hire’s values fit. Similar to engagement surveys, adding quantitative questions to these feedback surveys can help with comparison over time.

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Pre-hire metrics

Pre-hire metrics are measurements to predict a new hire’s success in the role before they start. Below are a few examples.

Although HR teams and recruiters can use pre-hire metrics to identify qualified candidates faster during the recruitment phase, pre-hire metrics do not always accurately predict a new hire’s future quality of hire. As a result, pre-hire metrics are not for talent management teams needing to evaluate their employee’s contribution to the business after the hiring process.

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Why is measuring quality of hire important?

Quality of hire helps companies optimize their hiring processes to ensure they hire the right talent for the right job. In Boudreau’s case, the team used this metric to improve candidate selection criteria. “[It allowed] us to pinpoint top performers while letting go of weak performers or those that showed toxic behavior,” Boudreau explains. 

Measuring quality of hire gives organizations a look into the factors that impact an employee’s success at their job and whether they impact the business’s overall bottom line. For instance, quality of hire can help companies determine:

  • What hiring sources produced the best employees for the role? What sources underperformed?
  • How well did pre-employment assessments predict candidate success in the role?
  • How well does the recruitment team find quality employees?
  • What is the new hire’s return on investment?

Moreover, with all-in-one HR software, quality of hire metrics are no longer impossible to measure and track. For example, all-in-one HR software, like BambooHR and Rippling, include modules that measure every aspect of the employee life cycle. By leveraging their data on employee retention, productivity, and engagement, companies can start calculating quality of hire and prepare for the future of hiring.

If you’re looking for tools to help track your workforce analytics, take a look at our performance management, recruitment, and HR software guides.


Jessica Dennis Avatar

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