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Hiring new employees is a critical process for any organisation, and it is essential to ensure that the right people are brought on board. One of the ways to evaluate the success of the hiring process is to measure the quality of hire. Quality of hire refers to the overall performance and success of the new hires and their impact on the organisation. Measuring the quality of hire can provide valuable insights into the effectiveness of the hiring process and help organisations make informed decisions about future hires.

There are various ways to measure the quality of hire, including analysing employee turnover rates, monitoring job performance, and assessing employee engagement levels. Each method provides unique insights into the success of the new hires and helps organisations make data-driven decisions.

The key to measuring quality of hire effectively is to gather comprehensive data from multiple sources and analyse it in a systematic manner.

This article will explore the various methods for measuring quality of hire and discuss the benefits of each approach. It will also provide an overview of the methods of estimating quality of hire, along with the relative advantages and disadvantages of each approach. Whether you are a hiring manager, HR professional, or an entrepreneur, this article will provide you with the information you need to evaluate the success of your hiring process and make informed decisions about future hires.

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section one

Top-Down Line-Manager Reviews

Top-down reviews from line managers are a popular method for measuring the quality of hire in subsequently hired candidates. This approach involves getting feedback from the employee's direct manager on their performance and impact on the team and organisation. The results of these reviews can then be used to assess the quality of the candidate's hire and inform future hiring decisions.

If a manager consistently provides negative feedback on a particular aspect of a candidate's performance, it may indicate that the organisation needs to re-evaluate its selection criteria for that role.

Benefits of using top-down reviews to measure quality of hire

There are two key benefits of top-down reviews for measuring quality of hire.

  • The manager has a unique perspective on the employee's performance as they are directly responsible for overseeing their work and evaluating their results. This makes them the ideal person to provide feedback on the candidate's overall impact on the team and organisation.
  • Top-down reviews can be used to identify areas of improvement in the hiring process. For example, if a manager consistently provides negative feedback on a particular aspect of a candidate's performance, it may indicate that the organisation needs to re-evaluate its selection criteria for that role.
Drawbacks of using top-down reviews to measure quality of hire

A major disadvantage of the top-down manager review is that information is only sourced from one person. If the manager harbours bias against an employee, that bias is likely to negatively impact their review. Similarly, if a manager shows favouritism towards an employee, that is likely to inflate their performance review, artificially increasing their perceived performance. In both cases, the top-down manager review is likely to yield biased information, distorting the organisation's understanding of new hire quality.

It's important to keep in mind that top-down reviews should be conducted consistently and regularly to ensure they accurately reflect the employee's performance. This helps to minimise the impact of any biases or personal opinions that the manager may have and ensures that the feedback is objective and fair. Additionally, it's essential to involve the employee in the review process so they have the opportunity to provide their own feedback and address any concerns they may have.

section two

360-Degree Feedback

360-degree feedback is another powerful tool for measuring quality of hire. This process involves collecting feedback from a wide range of sources, including the employee's direct manager, peers, subordinates, and even customers or clients. The goal is to provide a comprehensive and well-rounded view of the employee's performance and strengths, and to identify areas for improvement.

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Benefits of using 360-degree feedback to measure quality of hire

When used to measure quality of hire, 360-degree feedback can provide valuable insights into the effectiveness of recently hired candidates. For example, it can determine if the candidate is fitting in well with their team and meeting the expectations of their role. It can also identify areas where the candidate may need additional training or support.

One major advantage of 360-degree feedback is that it collects data from many people, minimising the impact of bias. Although one or two raters may have bias against a specific employee, it's unlikely that the entire team would, diluting the impact of bias. This protects employees from the threat of bias and provides the organisation with a more holistic image of the new hire's quality.

"One major advantage of 360-degree feedback is that it collects data from many people, minimising the impact of bias."

Drawbacks of using 360-degree feedback to measure quality of hire

A common criticism of 360-degree feedback is the potential for skewed incentives. Team members may exaggerate the performance of their friends, showing solidarity over management. As a result, it can be difficult to trust the results of 360-degree feedback processes, especially if almost everyone receives positive reviews from colleagues. To mitigate this, 360-degree feedback data must be analysed regularly to look for patterns of excessively positive ratings from close-knit groups of colleagues.

To effectively use 360-degree feedback to measure quality of hire, it is important to have a clear and well-defined process in place. This process should include defining the goals and objectives, selecting the right participants, and creating a relevant and easy-to-understand feedback form. The form should ask questions about the candidate's performance, strengths, and areas for improvement, and be designed to be anonymous and as unbiased as possible.

section three

Objective Performance Outcomes

Another effective way of measuring quality of hire is using objective performance measures, i.e. sales totals, number of widgets created, or number of queries answered etc. These measures provide a clear and quantifiable way of determining how well a newly hired candidate is performing on the job, and can be compared with other employees to identify top performers.

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Advantages of using objective performance outcomes to measure quality of hire

One advantage of using objective performance measures is that they can be easily collected and analysed. For example, sales totals can be tracked using a CRM system, the number of widgets produced can be recorded using a manufacturing software, and the number of queries answered can be monitored using a customer service platform. This data can then be used to create graphs and charts that show the performance of each employee over time, allowing managers to quickly identify areas for improvement.

In addition to providing a clear picture of employee performance, objective performance measures can also be used to set performance expectations for new hires. For example, a sales manager might establish a goal of generating a certain dollar amount in sales per month, while a customer service manager might set a goal of answering a certain number of customer queries each day. This helps ensure that new hires are aware of the expectations and performance standards they need to meet, and provides a clear framework for measuring their success.

Drawbacks of using objective performance outcomes to measure quality of hire

Relying solely on outcomes can be tricky when evaluating quality of hire. For example, many other factors could influence a particular sales representative’s monthly total, not just their ability. For example, during an economic downturn, their sales total is likely to decrease, regardless of the employee’s ability. Similarly, the quality of the leads assigned to them is another factor outside of their control, distorting our ability to measure performance objectively. Lastly, personal factors could be influencing an employee’s performance, irrespective of their ability i.e. health concerns, family troubles, or caring responsibilities.

When using objective performance measures to estimate the quality of hire, you must account for these extraneous variables as much as possible. For example, benchmarking sales performance relative to their wider team could eliminate the impact of the external sales environment. Although you can never account for every possible variable, the more these factors are considered, the more likely you are to utilise objective performance data effectively.

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section four

Employee Retention

Employee retention is a crucial aspect when evaluating the quality of hire. It is widely recognised that retaining employees can result in significant cost savings for a company, as the cost of replacing a single employee can range from one-third to two times their annual salary. By considering employee retention in the measurement of quality of hire, companies can not only reduce expenses but also guarantee they have a high-performing workforce.

One way to assess employee retention is through turnover rates. If a company has a high turnover rate, it may indicate that the newly hired employees are not a good fit for the company, which could reflect the quality of the hiring process. By monitoring and reducing employee turnover, companies can improve their hiring process and determine if they are choosing the right candidates for the job.

Advantages of using employee retention to measure quality of hire

Using employee retention as a proxy for quality of hire has several benefits:

  • Employees need to remain with the company for a certain period to make a meaningful impact in their role. High performance means little if the top performers leave their roles quickly, preventing them from providing extended benefits to the organisation.
  • Employee retention also evaluates culture fit, as long-standing employees are likely to be attached to their organisation, indicating the effectiveness of the recruitment process.
  • (Although not a guarantee of performance) A long employee tenure suggests the absence of serious competency issues, as those would have resulted in termination.
Drawbacks of using employee retention to measure quality of hire

The main criticism of using employee retention as a measure of quality of hire is its connection to performance. Although low performers are likely to leave the organisation, mediocre employees may not. Using employee retention as a measure of quality of hire thus obscures the mediocre performance of certain employees, ignoring the ineffectiveness of the recruitment process in identifying top performers.

The solution is to combine employee retention with another form of performance measurement to capture both aspects. Many organisations are using a combined metric known as "Employee Lifetime Value", which quantifies an employee's total contribution throughout their employment. By considering both retention and performance, we can get a clearer picture of the true nature of quality of hire and better measure it.

section five

Employee Engagement

Employee engagement is the final factor determining the quality of hire in subsequent candidates. Companies today understand that engaged employees are, on average, more productive and dedicated to their work, leading to improved overall performance and success. Employee engagement also plays a significant role in attracting and retaining top talent, which is essential for organisations to remain competitive. Most importantly, however, engaged employees are happier, less stressed, and more satisfied in their role, protecting their wellbeing.

Employee engagement can be measured through various methods, including surveys, focus groups, and one-on-one interviews. The key is to gather data that provides a comprehensive picture of the employee's experience and level of engagement. Questions should focus on areas such as job satisfaction, motivation, and sense of purpose. This information can be compared with data from other employees to identify patterns and trends and make data-driven decisions.

Advantages of using employee engagement to measure quality of hire

One of the most significant benefits of using employee engagement to measure quality of hire is that it provides real-time feedback. Companies can gather data from newly hired employees within their first few weeks or months on the job and assess their level of engagement. This information can be used to make immediate adjustments to the hiring process, ensuring that future hires are a better fit for the company culture and have the necessary skills and abilities to succeed.

Drawbacks of using employee engagement to measure quality of hire

Employee engagement does have drawbacks particularly when compared to performance and retention. Although engaged employees generally perform better, the correlation isn't perfect, and some low performers may simply enjoy their work. Similarly, engaged employees are less likely to leave, but that isn't to say that they will remain forever, weakening the relationship between the two. Lastly, the unique benefits of employee engagement are rather intangible, making it difficult to evaluate their impact. For example, engaged employees may boost team morale, but quantifying this effect is difficult, making it hard to use as a quality of hire metric.

Although performance and retention are likely to have a stronger commercial impact on the organisation, employee engagement is still worth measuring. On a human level, employers want their employees to be happy, fulfilled, and satisfied, making it a vital consideration for hiring. When estimating quality of hire, performance and retention should be the top considerations, but after accounting for these variables, engagement must then be considered, with the most effective selection processes being optimised for all three.

section six

Conclusion

Quality of hire is a complex, multifaceted construct which incorporates elements of performance, retention, and engagement, and consequently there is no one ideal measure. Organisations must therefore evaluate quality of hire across these three dimensions, ensuring that subsequently hired employees meet all three criteria. By omitting any one of these three dimensions, you lose the essence of quality, setting the organisation up for failure. For example, a selection process which effectively predicts performance, but results in high attrition isn’t a good process, and the quality of hire reflects this.

Ultimately, quality of hire is determined by the quality of this selection process, which starts with the inclusion of relevant assessments. Organisations who only use interviews are ignoring the myriad traits, abilities, skills, and characteristics which underpin quality of hire, and simply cannot expect to optimise it.

By including a range of relevant psychometric assessments, such as ability tests, behavioural assessments, and skills tests, you broaden the scope of the selection process and capture more valuable information. In doing so, you are significantly more likely to improve quality of hire across all three dimensions, resulting in a tremendous return on investment.

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