Quality of Hire Guide: How to Strategize, Measure, and Ensure Quality Recruit
Given that 88% of companies say quality of hire is the most important indicator of recruiting success[1], does your business have a strategy to get the right people for the right job? Yes, finding the best-suited talent can be a tough task, but making a poor hiring decision could cost your organization up to $240,000, says the US Bureau of Labor Statistics[2]. In fact, a bad hire could cost your business an average of up to 30% of the first year’s salary for that employee.
Today, you need “resilient talent” to adapt seamlessly to the rapidly changing corporate landscape. This can be achieved by focusing on a strong quality of hire strategy, which reduces the cost-of-hire and time-to-fill while ensuring better hiring quality.
It isn’t just finding the right talent but the speed at which job openings are filled that matters since it impacts a business’s ability to boost revenues and scale. This guide tells you all you need to know about ensuring quality recruits with the right quality of hire measures and strategies.
What is quality of hire?
Quality of hire is essentially a metric that tells you what value a new recruit can bring to your company and what they can contribute to the overall bottom line. A quality of hire scoreboard can be created by evaluating your recruits on their performance in relation to various benchmarks, such as role-based competencies, potential to succeed in achieving established goals, company values, manager satisfaction, etc.
In other words, quality of hire is a process through which an organization evaluates the impact a new employee can have on the business. The better the impact, the higher the hiring quality. The metric can also reveal how good the hiring process is. However, remember that “quality of hire” can mean different things to different companies because what they need from a new employee to drive success will be different.
Suggested Read: Recruiter’s Guide to Recruitment Metrics, Analysis & Tracking Hiring Efforts
Importance of quality of hire metrics
By measuring and analyzing quality of hire measures, an organization can ensure that the right candidates are hired for the right roles. This is because the data can indicate where the hiring process can be modified to improve quality hiring. Even for businesses with the deadline or budget restrictions, such metrics can help achieve maximum value from limited resources.
So, quality of hire metric can not just guide your talent acquisition strategy, but it can also inform you of hiring effectiveness. More importantly, it can bring strategic and operational benefits for all stakeholders in the talent management cycle. The key is to use the data analysis to learn and improve.
Recruiters benefit from quality of hire metrics
These metrics can help recruiters determine areas of improvement in their hiring process. For instance, they can identify recruiters who consistently make better or worse hiring decisions. This can then help you gauge the differences in hiring practices between recruiters.
HR benefits from quality of hire metrics
As mentioned above, it can help identify the top recruiters in the company who deliver high-quality hires consistently. The metrics can also help the HR department estimate the contributions of the hires to the business. They can also show that business-related changes, such as cost-cutting measures, impact hiring quality. In fact, your organization can gain a competitive edge by identifying the source of quality hires and using the information to modify your sourcing strategy.
Overall company benefits of quality of hire metrics
With better quality hires, the chances of your business establishing its position as an industry leader improve because such recruits enhance productivity and innovation. The metrics can play a key role in improving the organization’s people process, ensuring higher employee retention. High turnover not only costs a business in monetary terms but can also impact its reputation. Additionally, by hiring top talent, you are likely to attract more top talent for your company.
Applications of quality of hire metrics
There’s no point in identifying and calculating quality of hire measures unless you can use them to improve your hiring process. Here’s a look at the major applications of these metrics.
Sources of quality hires
Check which candidate sourcing channel is bringing you the highest number of quality hires and stick with them. You should also check sources that are not bringing you a good number of candidates and see where you can make changes to improve sourcing. For instance, you might need to tweak the job description to attract the right talent via some sources.
Positions with above-average turnover rates
These could be job roles for which it is the most difficult to find good candidates. Here too, you might need to check the job description to see whether it aligns with the role. Make sure the role is clearly and accurately defined and tells the job applicant what they can expect from the job. You could also check the sources for applicants for these jobs and compare them to sources that bring you a higher number of quality hires. You might discover that you need to change the sourcing channels for specific jobs.
Quality of hire for a specific business unit/department
Compare the sourcing channels and job descriptions between units/departments to examine the difference between units with more quality hires and those with less. Check for differences in terms of candidate sources, job descriptions, interview process, onboarding process, and manager reviews. Also, check for time to hire and quality of hire.
Positions with below-average performers
A potential reason for lower-than-average performance is a misalignment of competencies with the job role. Another reason could be the role not being clearly defined. Below-average performance could also occur when the outcomes defined for a position are beyond the abilities or the experience of the employee you’ve hired for the role. It is useful to revisit both the role and the compensation before looking for new candidates.
Performance of interviewers or recruiters
Comparing interviewers or recruiters who are able to gauge future performance well versus those who tend to fail at such evaluation can help you fine-tune the hiring process. The first step here is to identify those who are more successful at quality hiring. The aim is not to pinpoint poor recruiters but to see who follows your hiring process. This can help you identify what needs to change.
Measuring quality of hire
Seeking to quantify quality seems like an oxymoron. But setting out clear metrics that can be measured to estimate quality can do the trick. The key is to find the right balance between objective and subjective measures of quality of hire. This can be done by using a set of pre-hiring and another set of post-hiring measures that can help you determine the cost/benefit ratio of an employee.
There are some measures that organizations of all sizes and across all industries should track to determine quality. These include job performance, employee engagement, application volumes, etc. To these measures, you will need to add measures that are specific to your company size and industry.
Below we take a closer look at the metrics to consider.
Pre-hire quality metrics
These are aspects to measure before hiring a candidate. They can help you estimate not only the quality of the hire but also the efficacy of your recruitment process. The key metrics at this stage include:
Application volume
To find the perfect-fit candidate, you will need large enough application volumes. A powerful AI-driven solution that offers access to a large database can be useful in this regard. From this database, candidates that fit the knowledge, skills, and personality attribute parameters can be shortlisted. Also, check the volume of qualified applications that come in through your job postings.
Application completion
The reality is that 92% of candidates don’t complete their applications[3]. So, it isn’t enough to receive job applications. You need to check how many complete the application process. The larger the number of questions on the application form, the less likely job seekers are to complete it.
Time to fill an open position
This is a crucial metric, as mentioned at the beginning of this guide, since speed can impact the value a business derives from the hiring process. Time to fill is measured from the date on which a position opens up to the time when a recruit officially accepts the job. On average, it takes about 35-45 days to fill an open position, although it could go up to 63 days, depending on various factors, including the industry type[4].
Post-hire quality metrics
These are metrics that help you determine the quality of hire after an employee joins the organization. It reflects the employee’s engagement level, contribution to the business, and impact on colleagues. The key metrics at this stage include:
Employee engagement
This is a measure of how enthusiastic an employee is about their job. The problem is that employee engagement has been declining over the past few years, dropping from 36% of employees being engaged in 2020 to 34% in 2021 and 32% in 2022[5]. Understanding engagement levels can help you work proactively to prevent disengagement and drive better retention rates.
Suggested reading on Candidate Engagement: Why candidate engagement is critical
Job performance
When you choose a candidate to fill a position, you pick someone you evaluated to be a top performer. Tracking their job performance directly tells you the value they offer to the organization. Such tracking can be in terms of their productivity levels and achievement of targets and goals. But remember that actively engaged employees are likely to be more productive.
Employee retention
An engaged and satisfied employee is likely to be more loyal to your company. Better employee retention can translate into a more stable workforce, which in turn can help your business expand and grow. Again, this metric can help you find ways to enhance engagement, productivity, and retention.
Formula-based quality of hire metrics
Once you have identified the parameters, the formula to use to evaluate the quality of hire for an individual employee and overall organization.
Quality of hire formula for individual employee
Where:
QoH = Quality of Hire
N = Total number of parameters
Quality of hire formula for overall company
To calculate the overall quality of your company’s hires, use the below formula. This can help you estimate how well your recruitment and onboarding procedures are working.
Where:
Average QoH = Average of the individual hire QoH numbers for your company.
A popular variation of the overall QoH formula is:
Where:
PR = Average job performance metric of new hires
HP = Percentage of new recruits that reach a specific productivity level within a predetermined timeframe
HR = Retention rate of new hires after one year
N = Number of parameters used (which in this case is 3)
However, retention rate might not solely depict the efficacy of hiring; rather it could be a reflection of the onboarding process or quality of the workplace.
Quality of hire survey questions
A simple and quick way to gain insights into your quality of hires is to conduct surveys of the managers, new hires, and their peers. By evaluating and scoring these surveys, you can build a quality of hire scorecard for each new employee. Here’s a look at some key quality of hire survey questions.
Manager feedback survey for quality of hire
- How would you rate (Candidate Name) as the right fit for the job on a scale of 1 to 10?
- How would you rate (Candidate Name) in terms of work ethics and positive attitude?
- How would you rate (Candidate Name) for cooperation with the team/business unit?
- How would you rate (Candidate Name) in terms of skills to meet the job expectations?
- How would you rate (Candidate Name) as a valuable addition to the team?
Peer engagement survey for quality of hire
- Does (Candidate Name) collaborate with the team to achieve common targets?
- When faced with an unexpected situation, does (Candidate Name) usually know whom to seek help from?
- Does (Candidate Name) have a good understanding of the company’s informal processes and structures?
- Does (Candidate Name) believe that the company has their best interests in mind while making business decisions?
- Does (Candidate Name) believe they have adequate tools to do their job?
Employee satisfaction survey for quality of hire
- Did the company meet your expectations during your first month here?
- How often have you felt you have been unsure of or left without direction regarding what to do or how to find the answers?
- How would you rate your satisfaction in working with your team on a scale of 1 to 10?
- Have you been able to forge good working relationships with your colleagues?
- Would you recommend a family member or friend to apply for a job opening at (Company Name)?
Tips to improve the quality of hire
A recent survey has revealed that 41% of organizations accepted that a bad hire over the past year had cost them at least $25,000, while 25% reported the impact of a bad hire at $50,000 or more[6]. So, here are some useful tips to improve the quality of candidates and hires.
- Identify the sources that bring you the best quality candidates and consistently use them.
- Use multiple interviews, rather than just one, to determine whether a candidate is the best fit.
- Collect pre-hire and post-hire data.
- Make sure you use the data to determine quality of hire metrics and modify the hiring process accordingly.
- Simplify the workflow for in-house decision-makers by using cutting-edge, AI-driven software solutions to ease hiring.
- Review and improve the training of recruiters to ensure better quality of hire.
Role of AI in improving quality of hire
While 86.1% of recruiters believe that Artificial Intelligence (AI) has speeded up the hiring process, 68% say that AI can eliminate unintentional biases from the recruitment process[7]. AI can also increase hiring efficiency by reducing time to fill by 70% on average[8]. Little wonder then that AI is one of the fastest-growing recruitment technologies today. Here are some of the key areas where AI can prove invaluable.
Screening
With the ability to scan huge databases to match candidates by qualifications, experience, skills, and job requirements, AI can easily shortlist the best-fit candidates. In addition, AI-powered software improves its performance with use to give you more and more refined results.
Assessments
Questionnaires have long been used to assess personality traits and other soft skills. AI can be trained to identify patterns in candidates’ responses to provide new insights.
Interviews
With access to video technology, AI can assess candidates’ speech patterns, word choices, facial expressions, and more to evaluate whether they are the best fit for a job role.
Overall hiring process
AI can help improve quality of hire by collating and analyzing data from various sources to provide insights.
Conclusion
The success of new recruits and the organization at large ultimately boils down to the quality of hire. Poor hires can lead to disengagement, dissatisfaction, and higher turnover among employees, which can impact overall morale. One of the easiest ways to improve your quality of hire metrics is to partner with a recruitment solutions provider that goes beyond Artificial Intelligence to offer you advanced talent intelligence.
Arya is a powerful AI recruitment platform that uses a holistic, multidimensional approach to empower your organization to achieve better outcomes. Request a Demo today to experience how the platform can drive quality of hire.
FAQs
What is the quality of hire in HRM?
Quality of hire in HRM refers to the assessment of an employee’s overall performance and contribution to an organization.
Why does quality of hire matter?
Quality of hire matters because it directly impacts productivity, retention, and overall success of an organization’s workforce.
What are the components of quality of hire?
The components of quality of hire include job performance, cultural fit, potential for growth, and alignment with organizational values.
How do we calculate quality of hire?
Calculating quality of hire involves analyzing performance metrics, feedback from managers, and assessing employee engagement and retention rates.
How do you identify quality candidates?
Quality candidates can be identified through a combination of effective sourcing strategies, rigorous screening processes, interviews, assessments, and reference checks.
Resources
[1] https://www.aihr.com/blog/quality-of-hire/
[2] https://www.businessnewsdaily.com/9066-cost-of-bad-hire.html
[3] https://www.knowledgecity.com/blog/people-never-finish-applications/
[4] https://www.linkedin.com/pulse/can-you-wait-49-days-why-getting-hired-takes-so-long-george-anders/
[5] https://www.gallup.com/workplace/468233/employee-engagement-needs-rebound-2023.aspx
[6] http://static3.mindflash.com/wp-content/uploads/2012/01/Mindflash_1.24.12-01-2.png
[7] https://www.tidio.com/blog/ai-recruitment/
[8] https://evalground.com/blog/recruitment-metrics-quality-of-hire/
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