The world of recruiting has become far more dynamic over the last 3 years as artificial intelligence (AI), machine learning (ML), and natural language processing (NLP) have become a standard in hiring tools. But, one thing that hasn't changed is the need for quality hires who can perform at or above company expectations and drive growth.

What is “Quality of Hire?”

Quality of hire (QoH) metrics are the standards by which we judge the success of hiring strategies. Essentially, these key performance indicators (KPIs) measure factors like attrition, performance, engagement, and cultural fit to determine the overall success of a new hire. These metrics allow recruiters, hiring managers, and HR to tailor recruitment and selection processes to optimize and improve them.

Why is Quality of Hire Important?

Quality of hire in recruitment directly measures a new hire's effects on company performance. Bad hires lead to increased costs, slower ramp times, decreased productivity, low team morale, and poor customer interactions, which in turn can result in a negative impact on revenue and reputation. On the other hand, a great hire will have the opposite effect. Quality of hire measures core metrics that help hiring teams understand the effectiveness of their hiring strategies and make data-driven decisions to improve them.

How to Measure Quality of Hire: 6 Core Metrics to Measure

1. Time to Productivity: This measures the time it takes for a new hire to become fully productive in their role. A faster ramp-up time indicates a higher quality of hire as they are able to quickly adapt and contribute to the company's goals.
2. Performance Ratings: This measures a new hire's performance against their peers over a specific period of time. A higher performance rating indicates a higher quality of hire as they are meeting or exceeding expectations.
3. Retention Rates: This measures how long a new hire stays with the company before leaving. Higher retention rates indicate a higher quality of hire as they are satisfied with their role and the company culture.
4. Cultural Fit: This measures how well a new hire aligns with the company's values, beliefs, and norms. A strong cultural fit indicates a higher quality of hire as they are more likely to be engaged and motivated in their work.
5. Cost-Per-Hire: This measures the cost to hire a new employee and can be compared to the performance and retention metrics to determine if the cost was worth it. A lower cost-per-hire in combination with positive performance and retention rates indicates a higher quality of hire.
6. Employee Satisfaction: This measures how satisfied a new hire is with their role, coworkers, and overall experience at the company. High employee satisfaction is a key factor in determining the quality of hire as it can impact retention and performance.

Using Quality of Hire Metrics to Improve the Hiring Process

Let's look at attrition as a KPI to improve. According to Awardco, in 2023, the average company attrition rate was 41%. Some industries were as low as 18%, others as high as 79%, but hiring managers and recruiters last year could've expected to lose 4-5 employees for every 10 they hired. This is a scary figure when costs-per-hire seem to keep rising year over year and employee productivity declines.

That said, decreasing attrition rates is a complex issue. If you start with Employee Satisfaction ratings and assess the management of teams where you're experiencing high attrition, you'll see one of the main factors of attrition. Next, if you look at your hiring process, company culture, and ramp times, you'll see how your team is performing in a nutshell.

Regularly tracking and analyzing these metrics can help you identify patterns and make objective changes before they become bigger issues- and interview intelligence can help your team evaluate these KPIs by providing data-driven insights and analysis at each stage of the hiring process.

Importance Of Quality Of Hire Metrics

In the context of modern recruiting, quality-of-hire scorecards can turn around an underperforming team. Measuring quantifiable metrics and KPIs allows managers to do a deep dive into understanding each employee's contribution, their ability to integrate into the team effectively, and ultimately, add to the company's bottom line.

Understanding why quality of hire is important will allow you to shed light on vital aspects of the hiring process, scrutinizing and improving each step. Let's shift the conversation to the impact and importance of quality of hire metrics.

The Impact of Quality Hires

Putting your recruitment process until a microscope can be uncomfortably revealing- and hiring can be an equally tricky business riddled with pitfalls. Misalignments in the recruitment process, such as biased or unclear job descriptions, ineffective interviewing techniques, and improper evaluation of candidate skills and cultural fit for your organization can lead to hiring decisions that don't meet organizational goals or expectations. Additionally, biases - implicit or otherwise can fog interviewers' minds skewing candidates' results and the company's culture.

Quality of hire metrics serve as the diagnostic tool to discover these problems so that you can solve them. For example, time to productivity metrics or "ramp times" can help you identify where the candidate skills gaps and onboarding processes are lacking. Armed with this knowledge you'd be able to hone in on these two topics to make more informed hiring decisions.

Calculating Quality Of Hire Metrics

There are many ways of calculating quality of hire metrics. The factors you include in your formula will be different based on your goals, hiring process, challenges, and the industry you're in. But no matter where you are, you need a quality-of-hire formula to inform your decisions.

As a baseline, most companies measure new hire performance metrics, turnover and retention metrics, and the hiring manager's satisfaction rating with the new hire. More complex formulas include benchmarking with other new hires. Pre-hire quality measures the quality of applicants, average job performance reviews the performance rating of the new hire against that of overall team performance,  time-to-productivity calculates ramp times, and employee lifetime value (ELTV) considers the costs of losing an employee. There are also many software solutions available that can help track and analyze these metrics for you.

To further optimize the calculation of quality-of-hire (QoH) metrics, consider integrating essential interview questions for determining quality-of-hire into your interviews. Questions should be open-ended, behavioral or situational in nature, and explore a candidate's past patterns of problem-solving, adaptability, collaboration, and alignment with the company's values and mission. Examples include:

• "Can you describe a time you overcame a significant challenge at work and what the outcome was?"
• "How do you approach working with team members who have a different opinion than yours?"
• "What motivates you to perform at your best, and how do you align personal goals with the company’s objectives?"

Employing these strategies ensures a comprehensive approach to calculating quality of hire metrics, ultimately leading to more informed hiring decisions and enhanced team performance. If you'd like to see more questions like these, maybe even create your own, click this link to be taken to our FREE AI interview guide creator. Once you're there, copy and paste your job description into the text field, and in a few minutes, we'll email you a complete interview guide ready for your next interview.

Quality Of Hire Metrics For Managers

For managers, leveraging quality-of-hire metrics for managers can significantly enhance the strategic hiring process and workforce quality. Looking at the hiring process from a bird's eye perspective allows you to see what you'd normally miss. This approach not only helps in how to improve the quality of hire but also supports the identification of potential areas for development within teams.

Let's illustrate this point by giving examples of actual actionable metrics, and how you can take action on them. If you’ve created a new hire scorecard, for example, you can analyze new hire engagement to see how well they are integrating into the team and working with other team members. If there are any issues, you can take action by providing training or mentorship opportunities to help them adapt better.

Another example is using performance metrics to assess how new hires are performing compared to current employees or industry benchmarks. If there is a significant gap in performance, it could indicate that changes need to be made in the hiring process, such as altering job descriptions or refining interviewing techniques- it could also mean you need to change your hiring criteria.

In closing, improving quality-of-hire metrics is the fastest way to turn around a culture or team that’s underperforming. New rules, harsher punishments for failure, and micromanagement will not accomplish what a simple shift in hiring strategy will. So if you‘re struggling to build a great team, improving quality of hire metrics may be just the thing you need.

If you’d like to see how interview intelligence from Pillar can help you build a more dynamic and diverse team, book a demo today!