A metric that matters: quality of hire

Every new hire that comes through your doors (or logs onto your Slack) is a big investment. It’s taken a lot of time and money to get them in front of that computer.

Hiring costs go beyond salary and benefits: you’re looking at headhunters, promoted job ads, travel reimbursements for interviews, and time spent recruiting and interviewing. If the folks you’re hiring aren’t a perfect 10 then not only did all that time and money go down the toilet, but you’re going to be spending even more on your next recruitment search.

Quality of hire is a popular HR metric used to gauge the value a new hire adds to your organization—so popular that SHRM calls it the “holy grail” of HR metrics. To measure quality of hire accurately you need to take a few metrics into consideration—because culture fit can’t be summed up in one single, easy-to-digest formula.

Let’s dive into:

• the importance of quality of hire,
• measuring quality of hire, and
• what we can learn from quality of hire.

Why should we care about quality of hire?

The importance of quality of hire is best shown by how it’s measured. The formula for measuring quality of hire looks like this:

(Metric 1  + Metric 2 + Metric 3) / (Number of metrics)

That doesn’t help much, I know. But the reason it’s so vague is because quality of hire encompasses so much. To measure quality of hire according to your organization’s standards, you’ll choose parameters that you prioritize and use them in your formula.

An SHRM study found that the top three metrics for quality-of-hire are performance appraisal score, retention rate, and 360-degree feedback scores. The list of measurable metrics, however, is long and varied:

Quality of hire is important because it sums up the importance of all of the metrics above. The higher your quality-of-hire score is, the more worthwhile and on-target your recruitment efforts are.

Quality of hire can be measured continuously throughout an employee’s time at the company—and even before.

• Pre-hire quality is a predictive measure based on interviewer impressions, referrals, scores on aptitude tests, and performance on assignments/assessments. An accurate pre-hire quality measurement will help you predict a candidate’s future success at your organization. HR expert Lou Adler recommends using these five factors to measure pre-hire quality:
  1. Comparable results
  2. Trend of growth
  3. Achiever Pattern
  4. Managerial and cultural fit
  5. Job represents a career move

Adler recommends scoring each of these from 1-5 and hiring only candidates who come in at 20 or higher.

• Three-month check-in. Quality of hire can be measured at the end of the 90-day onboarding period. HelpScout recommends looking at the new hire’s success in their role, social acclimation, and day-to-day performance. Manager reviews and 360-degree feedback can help HR measure quality of hire at this early stage.

What we can learn from quality of hire

A healthy quality of hire score shows that our recruiters are bringing in good people, our managers are supporting retention efforts, and our new hires are thriving in their new roles.

Rising quality-of-hire scores show gains in retention, engagement, and all of the metrics cited above. Sinking scores show losses—meaning that your culture is at risk.

Keeping a careful eye on quality of hire will help you understand how your organization is doing from recruitment through the end of an employee’s time at the organization.