How to Measure and Improve Quality of Hire

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1 1 How to Measure and Improve Quality of Hire Results from a roundtable with Silicon Valley companies

2 2 Executive Summary Quality of hire is a strategic metric and an integral part of the future of talent acquisition. A 10% improvement in quality is 100 times more impactful financially than a 10% cut in costs. Quality of hire is measured by less than half of companies today, and even less have it as a key KPI (key performance indicator). All companies have practices & initiatives to impact quality, but rarely validate their effects. The top 3 metrics used today for quality are: 1. Turnover 2. Performance review 3. Hiring manager satisfaction Turnover, performance review, and hiring manager satisfaction are acceptable proxy measurements as long as you understand their limitations. They are not quality of hire measures.

3 3 Roundtable Methodology and Company Profiles Checkster organized a roundtable with leading companies in the San Francisco Bay area to discuss the quality of hire. Among the participants were talent acquisition leaders from: Agilent, ebay, Facebook, Healthnet, Hitachi, Intuit, Juniper, Kaiser Permanente, Lawrence Livermore Labs, Logitech, NetApp, Plantronics, Safeway, Sunpower and Yahoo. Some lessons were gathered from recent employers of the talent acquisition leaders, including Microsoft and Bank of America. Below is a summary of the exchange and a guideline to help you implement quality of hire within your organization. Status Among the companies in the room, only 43% were measuring quality of hire and among those, only 33% were including it in their key KPIs. That is a staggering 14% of all companies, and even those were sometimes qualifying it as kind of including it. Although the sample is low (less than 20 companies), we believe it is certainly not worse than the national average.

4 4 How is it measured? Among all the companies surveyed, only 2 had very elaborate and dedicated ways of measuring it. The chart below includes the companies description of how they measure it. Quality of hire - Definition Formula used Company 1 First year attrition Employee who left/total employees Company 2 First year performance review (with specific focus on 10 specific competencies) Rating from 1 to 5 and monitoring that result over time. Company 3 1 st year attrition (distinction made for HIPO and voluntary, involuntary). Time to productivity for sales position (how quickly they generate revenue) Perception of managers and recruiters % of quota achieved Rating on a scale Company 4 Company 5 Company 6 1 st 6&12 months attrition Speed to proficiency for key skills on call center staff 1 st year performance review compared to the rest of the employees Not exactly quality of hire, but quality of candidates presented Hiring manager satisfaction with new hire 1 st year attrition 1 st year performance review % who achieved preset levels on tasks Ratings Rating Rating from 1 to 5 (How do you compare this hire to others?) Rating

5 5 Company 7 Company 8 Hiring manager onboarding survey after 60 days and 6 months Succession planning (what was their next job?) 1 st year performance review 1 st 6 month involuntary termination for cause 1 st year voluntary turnover Time to productivity for sales position (how quickly they generate revenue) Performance rating after 6 and 12 months Hiring managers rating Gross margin contribution First year merit increase Rating Title of next job(s) Rating % who achieved preset levels on tasks Ratings Ratings Standard financial As % comparison In the Plan: Company 1 Company 2 Company 3 Retention 1 st year 1 st year performance rating Quality of slate Talent assessment after 1 year Competency rating for tech people Quality of Hire only for selected population of employee: One company noted that they were not measuring it for the whole employee population, but only for a select number of job categories. Those jobs are sometimes referred to as pivotal jobs. The criteria this company uses to decide on who to measure are: 1. Is this job in demand (i.e. is there more demand for the job than supply)? 2. Core role that impacts business goals. 3. Vacancy factor: if the position is empty, is there is an impact on the business itself (i.e. billable resource)? 4. Positions with enough headcount. 5. Cost of training.

6 6 Other KPIs used by Talent Acquisition department: We also asked one group what other traditional metrics were used by their department. Here is the list: Turnover (voluntary/involuntary) Hiring Manager satisfaction Cost per hire Source of hire by volume or level of spending (i.e. search firm expenses, ) Candidate satisfaction Time to fill Vacancy rate Diversity Acceptance rate School origin Individual recruiter or sourcer metrics of productivity How to improve quality discussion: Measuring quality is an interesting topic, but only if the discussion leads to ways of improving it. When we asked what actions were taken to improve quality, the following were mentioned: 1. Improve job definition & success analysis 2. Start measuring quality of hire 3. Know best sources of hire 4. Focus on pivotal jobs and don t limit yourself to FTE (also contingent, contractors, consultants, suppliers, ) 5. Improve interviewing process 6. Quality of recruiter (incentive, ask if they challenged HM decisions) 7. Assessment 8. Selected referrals ( linkedin inside ) 9. Background Check 10. Screen according to company values 11. True reference check 12. Ask for previous performance review (at the last company, to know if they were not let go for performance reasons).

7 7 Checkster s recommendation on quality of hire: ❶ Measure the quality of hire with line manager benchmarks when available (quota for sales people, ). ❷ If you use turnover, performance review, or hiring manager satisfaction as metrics, understand that they are only proxy measurements. ❸ The best proxy measurement is a 360 feedback approach typically performed 90 days post hire. Call Yves Lermusi at Checkster ( ) if you want to learn more or see how Checkster can help you measure and improve your quality of hire. About the authors and moderators: Carol Mahoney, Chief Strategist for Talent Acquisition on Demand. Most recently VP of Talent Acquisition at Yahoo, Inc. from 2003 through Yves Lermusi, CEO, Checkster. Most recently president of Taleo Research from 1999 through About Checkster: Checkster provides Feedback tools that are revolutionizing traditional 360 degree feedback methodologies, employer reference checks and quality of hire measurements. More info:

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