Measuring quality of hire, or measuring the on-the-job performance and the retention rate of new hires, is one of the most strategic moves any recruiting department can make. Having that metric handy allows you to prove the business value of your recruiting team, improve the recruiting process itself, and get hiring managers attention.
Yet, many recruiting leaders have trouble building a business case to prove the economic value of this metric. Some argue that it’s difficult to measure or the impact is unclear.
The goal of this post is to help with this predicament and give you a clear list of the benefits of measuring quality of hire. In part one of this article, I talked about the positive impact that measuring quality of hire can have on your business. Now I’d like to do a deep dive into how measuring quality of hire can specifically benefit recruiters and the recruiting function.
Here are 11 of the most tangible benefits your recruiting team will experience when you measure quality of hire:
1. Helps you prove the business impact of your recruiting team
Boston Consulting Group data has shown that of all people management programs, recruiting has the highest impact on revenue and profit margins. Your job is to prove that value within the corporation that you work. Start by measuring the percentage increase in the on-the-job performance of new hires and over time you can demonstrate to executives how even a 5% increase in performance can have a large financial impact. If you multiply that percentage of improvement (e.g. 10%) by the yearly average revenue per employee at your firm (e.g. $200 K), and then multiply that sum by the number of new hires over a year (e.g. 100), you can convert recruiting’s impact into dollars (e.g. $2 million).
You can also examine the jobs where their results are already reported in dollars (i.e. sales), and use those results to further show your increased dollar impact as a result of improved recruiting. If you take the time to quantify most of the business impact factors listed in part one of this article, you will have more than enough ammunition to make a compelling business case for significantly more funding.
2. Enables you to improve every recruiting process
Improving the performance of new hires shows that you’re competitive in the talent marketplace. It’s also true that measurement creates a focus on improvement because “you can’t improve what you don’t measure, and whatever you measure improves.”
Fortunately, one of the primary goals of quality of hire is to improve every recruiting process that contributes to hiring. For example, if you find that some new hires are top performers even though they only got mediocre reference check scores, you can use new hire data to determine which elements of the reference checking process are not predicting. You can then refine your reference checking process so it better predicts on-the-job performance. When you apply the same continuous improvement approach to every other important aspect of the recruiting process, executives will see that you are using kaizen to continually improve each year. And that improvement might serve as the basis for increased funding for recruiting.
3. Increases the number of referrals you get and in turn boosts your employer brand
Since top performers make the best referrals, increasing the number of top-performing hires will simply give you more top employees to approach. In addition, as better performing new hires “talk up your firm” because of their high level of credibility, your overall employer brand and your ability to attract additional top performers will strengthen. And finally, if your improved hiring process allows you to hire one or two “magnet hires,” this will send a message to others that “something is happening” at your firm.
4. Gets hiring managers to pay attention to you
Research shows that the relationship between the recruiter and the hiring manager is literally the most important contributing factor in hiring success. Google found that the best way for recruiting to “influence” hiring managers was to utilize data to “nudge” and convince them. When only opinions are involved, hiring managers will always win out. However, because managers love data, that can all change when recruiters learn to bring quality of hire data to the table, instead of opinions.
5. Motivates managers to take ownership of hiring
It is obvious to recruiters that all too often hiring managers don’t take recruiting seriously, and they don’t devote enough time to it. One of the causes of that disinterested attitude is the lack of hiring manager accountability. However, if you introduce the widespread measurement and reporting of quality of hire data, everyone will know which managers excel at hiring and which do not. This expanded visibility of a manager’s performance in hiring normally increases a manager’s interest in recruiting and in many cases it encourages them to take ownership of the result.
Taken together that means that recruiters will have to spend less time cajoling hiring managers. And with their increased feeling of ownership, managers will even speed up their part of the hiring process. And that alone will improve the quality of those that are hired.
6. Helps you identify which recruiters excel
By identifying the recruiters that produce the highest performing hires, you can recognize and reward them. In addition, you can determine what competencies they have, and use that information to hire better performing recruiters in the future. You also might find that measuring quality of hire can be a recruiter attraction tool. Great recruiters love organizations that measure quality of hire because it gives the best recruiters an opportunity to continually assess their progress or to show off.
7. You can reward great hiring managers
It makes sense to reward hiring managers when they make great hires. Obviously, they are helping themselves and their team when they make a great hire. But they are also helping the entire organization. That is because their great hires are likely to stay a long time and move up in the organization and that ends up helping everyone.
Without quality of hire data, it’s simply not possible to identify and reward great hiring managers for the results that they produce. And after you identify them, if you use those highly successful hiring managers to mentor or coach others, the quality of hire will also improve among those that they help.
8. Allows you to assess the impact of your vendors
If you outsource any of your recruiting to vendors, measuring the performance of your new hires allows you to accurately assess whether the vendors are adding value, and how much. For example, if a corporation does both internal and external executive search, quality of hire data will help you determine whether the external vendor is the more effective.
9. Quality of hire data provides legal support
Quality of hire data can be used to support legal cases. In fact, one of the most impactful ways to legally prove that you haven’t discriminated is to demonstrate, using quality of hire data, that your recruiting process has been validated. This is a fancy way of saying that your recruitment process and its components are job-related and they produce new hires that meet or exceed on-the-job performance standards. Proving these two factors can help you win almost any discrimination case.
10. Helps you eliminate any executive perceptions that recruiting is unconcerned about the output of its process
The most obvious reason that recruiting should measure quality of hire is because as a result of 6 Sigma initiatives, every business function now measures quality. For example, if you select a new piece of equipment, you are expected to check if it is performing up to standards once it’s installed. In baseball, if you selected a new pitcher in the draft, there would be no case where you wouldn’t check back months later to see if their ERA is that of a top performer.
In recruiting we have often had a bad reputation for “dropping new hires over the wall” and seemingly not caring about what happens to them. Appearing “not to care” about your results is never a good thing. Measuring the performance and the retention of people that you hire helps to build recruiting’s credibility and it makes us appear more businesslike to executives.
11. Helps to show that you are a data-driven function
Most business functions have long ago shifted to a data-driven model. So demonstrating that recruiting leaders also use data to make decisions and to improve will impress most executives. Over the years, by not measuring quality of hire, recruiting leaders have looked out of place and adding a measure of quality will show that you are now an equal.
It should be obvious that given the long list of benefits, measuring quality of hire is 2nd to none when it comes to impacting the success of your recruiting team. And let me assure you that if you have heard about the negative comments often put forth in other quality of hire articles (i.e. data issues, recruiting doesn’t have total control of hiring, quality is hard to define and measure) that each of these issues are relatively easy to overcome.
Remember every other business function already measures quality as a result of 6 Sigma or customer service initiatives, so don’t panic because it’s easy to get help from others working in your organization. And if you have further questions during the next month, drop me a note at JohnS@sfsu.edu and I’ll help you get through any quality of hire problem.