Measuring Quality of Hire in Recruitment
Measuring Quality of Hire in recruitment is of growing significance to the HR community and is starting to surpass the easier-to-measure cost per hire as the key HR metric. This is not to say that cost management and speed of hire are not important, but they are often meaningless unless Quality of Hire is also measured.
The problem with Quality of Hire as a metric, however, is that it is relatively difficult to define and measure (compared in particular to cost and speed); these difficulties have tended to dissuade people from undertaking measurement. Nonetheless, Quality of Hire is now being more widely used to measure recruitment success. According to research by Staffing.org in the USA, 30% of companies are now making some attempt to measure the quality of their new hires. While this may not sound like a huge figure, it is up from just 2% in 2000, and 10% in 2002.
In this article we have looked at various ways to measure Quality of Hire - and why it is important so to do.
How does Quality of Hire analysis help a recruiting organisation?
A good starting point is McKinsey’s ‘War for Talent’; this report suggested that high performers (quality hires) significantly increase productivity and profits (compared with average performers). For example, in Operations they are able to increase productivity by 40%; in management roles they increase profits by 49%; and in sales positions they are responsible for 67% greater revenue. Conversely, poor-quality hires can lead to poor customer service, reduced productivity and decreased market share. The wrong hire also leads inevitably to replacement costs including, admin, processing and decreased productivity from the hiring manager.
Empirically the impact of Quality of Hire on corporate performance is measuable via elements of Human Capital Analysis (which seeks to measure the impact of human capital practices on shareholder value). One of the best known UK studies in this area is by Watson Wyatt: this study shows five key areas of Human Capital Management practice that are associated with the creation of shareholder value, one of which is ‘achieving recruiting and retention excellence’; recruiting and retention excellence alone leads to a 14.6% increase in market value. According to the survey, companies that manage people well will out-perform companies that don’t by 30 – 40%. (We look at the relationship between Human Capital Management and Quality of hire in more detail in a separate article).
