Driving Quality of Hire
Beyond Cost-Per-Hire: Driving Quality of Hire - Elevating Talent Acquisition Across Asia
This post is part of the Elevating Talent Acquisition Across Asia series - a collection of personal viewpoints and experiences in connecting Talent Acquisition practices to organizational outcomes.
The series is meant to provide insights, educate, challenge the status-quo, and provoke thought amongst HR/Talent practitioners on delivering exceptional business results with the right Talent Acquisition strategy, practices, and capabilities.
Quality of Hire - The Neglected Metric
In my last post, I covered how Cost-Per-Hire (CPH) is an often-used metric to evaluate Talent Acquisition (TA) success, but should be balanced with other critical metrics such as Quality of Hire (QOH) and Cost-Per-Vacancy (CPV) that give organizations more insight into the true return on investment of TA and its ability to help achieve business outcomes. I also covered the hidden costs that aren’t calculated in most CPH measurements, including implicit and intangible costs like the cost of a vacancy.
According to the CEB, less than one-third of organizations measure QOH, while more than 80% track Time-to-Fill (TTF). Aside from TTF, most organizations use CPH and Source-of-Hire (SOH) to maximize recruiting effectiveness. The purpose of all these metrics is to assess what the impact of TA is.
But in the process, we’ve downplayed what it takes for a successful TA function to enable the organization to meet business outcomes - right talent, at the right time, for the right role. To achieve this combination of talent, timing and role, organizations must measure their success in attracting, hiring, onboarding and retaining talent. At the root of all of this, is QOH. The larger question is: why is QOH being overlooked?
In my original post, I emphasized the need for organizations to go beyond transactional & reactive recruiting practices and instead adopt a proactive TA strategy to position themselves to be agile and competitive players in the marketplace. It’s therefore not enough to focus on CPH and measure what’s easy to pull from the ATS, such as TTF. To measure true business impact, organizations must evaluate QOH. It’s critical for business growth and sustainability. The right talent enables organizations to innovate, grow or to simply compete and survive. Furthermore, it brings in-demand skills and fresh perspectives, it injects confidence and energy into the organization and has a positive impact on culture.
In this post, I will show how to define, measure and drive quality of hire. Topics covered include:
- Defining QOH
- The Case for Measuring QOH
- Measuring QOH
- QOH Failures
- Driving QOH through:
- Talent Acquisition Process
- Talent Acquisition Team
- Hiring Manager Engagement
- Employer Branding
Although the definition above seems straightforward enough, it is hard to pin down for many organizations. Part of the challenge stems from a disconnect between TA and hiring managers; QOH is evaluated purely on anecdotal feedback from hiring managers, leaving talent acquisition with subjective data points to work with.
While QOH is unique to each organization, department, location and role, it’s important for TA leaders to work closely with hiring managers and the C-Suite to arrive at consistent and mutually-agreed-upon definitions; these definitions must consist of meaningful measurements that will define success in hiring and retaining the right talent to fuel the business.
The upside of assessing quality certainly outweighs the challenge of doing so. Teams with good data on quality can:
- Prioritize strategy, processes, and partnerships to maximize quality;
- Define hiring needs that translate to high performance in role;
- Choose sourcing channels that produce the best hires; and
- Focus recruiters’ time confidently on the activities that drive quality.
The Case for Measuring QOH
According to McKinsey and Co., high performers generate 40% more productivity in operations roles annually, 49% increased profit in general management roles annually and 67% increased revenue in sales roles annually.
On the flip side, the cost of low-quality hires is substantial given the high costs of turnover and low performance. As work complexity increases, the performance costs of low-quality hires can increase significantly. Here’s what the cost differential looks like:
Differences between the productivity of average performers and high performers are amplified for complex job families. For example, sales jobs that surpass the traditional, transactional-selling job to one of the strategic solution selling yields a wider performance distribution – high performers are nearly three times more effective than core performers in the strategic solution-selling environment. As a result, hiring high-quality hires has real benefits for organizations that recruit effectively.
Quality of talent is strongly linked to financial performance. After analyzing the HR data of more than 1,000 companies and 20 million employees, Hewitt Associates (now AON) found that with a mere ten point increase in what they call “Talent Quotient”, a Fortune 500 company can increase its bottom line by between $70 million to $160 million over three years.
The impact of pivotal/critical employees, should be priority, as you develop a plan to measure quality. You may find that it is more beneficial to focus on critical roles first – and expand your measurements to other groups of employees later.
The CFO is a valuable ally who can help an organization determine more precise dollar amounts. Be sure to bring your finance team on board during this process. Creating a base of metrics to benchmark will even help you predict who will make a quality employee in the future. Knowing this, it should be clear that measuring QOH is important to an organization’s continued success.
Measuring quality of hire accurately may be hard, but it is critical for managing recruiting investments effectively. Common challenges to measure QOH include:
Quality measure is difficult to track: Measure the right metrics, even if they are hard to track. For roles with clear quantitative performance metrics, such as call center and sales representatives, incorporate these metrics and benchmarks into the quality of hire measure. For roles for which direct measurement of performance is difficult, ask managers and new hires survey questions about performance and fit.
Hiring manager perceptions of quality are subjective: Go beyond satisfaction questions in hiring manager surveys. Use a series of well-constructed questions about new hire performance and fit.
Post-hire activities that are beyond recruiting’s control impact quality: Hiring managers often do not have the skill, motivation, or tools to onboard new hires to maximize quality. Recruiters can help hiring managers deliver on expectations set during the recruiting process.
Unlike many process metrics, quality of hire cannot be readily pulled from an applicant tracking system (ATS). It includes a combination of metrics and survey results from recent hires and the direct manager who hired them.
It also often QOH data must be converted into numbers and customized for an organization’s specific measurement capabilities and requirements. Otherwise, it is much too open to interpretation. To turn data into a useful tool to measure Quality of Hire, start with this simple question: “How does our organization define success?”
You want to measure elements that actually contribute to the organization’s success and evaluate only the highest priority roles within an organization (pivotal/critical hire). Begin with the end in mind. Tie your measurements to business outcomes and financial impact. Ask yourself what a person in this role should be achieving to add value to the organization.
While there are many data points you can track to measure QOH, selecting a few of the options listed below is a good way to get started and overcome perceived challenges to measuring it. For instance, first year turnover is often considered a good indicator of quality. Benchmark the data you have collected by role, department, location, etc and analyze it over time. In each of these examples, you should be recognizing opportunities to use this data not only to measure, but actually predict the quality of hire.
Although QOHis a concern for organizations across Asia, many are falling behind their competition because they settle for employees who are simply “good enough.” The reasons for this vary between organizations, but the following are some very common reasons:
Unrealistic Expectations of Internal Capacity: Internal HR/TA teams often lack the skills, capacity or scalability to deal with sudden hiring spikes. This has led to an over-reliance on contingent recruitment firms (agencies) and higher external costs.
Failure to Reach Passive Candidates: Active candidates account for 10-30% of potential available candidates in the marketplace depending on the type of roles. Organizations are restricting themselves – and their ability to hit and exceed targets – by focusing entirely on the performance capabilities of the active candidate pool.
Agency Dependency: While agencies are helpful for filling niche, urgent or one-off roles, they’re not designed to be long-term partners and TA advisors. They will not dive deeply enough to understand the culture or what it takes for an individual to thrive within an organization or department. Nor are they required to provide you with the best talent if another client is paying top dollar for a similar position. Many agencies focus on providing a large volume of CVs in the hopes that someone in there is promising. This not only erodes hiring manager confidence, but undervalues the focus on the best cultural and technical fit for your team.
Complexity throughout the hiring process: Hiring has become more complex due to factors such as an increasing number of stakeholders in the process, more regulatory requirements to meet, more tools and technology to adopt, pressure to grow sourcing channels, and ongoing changes in organizational and talent strategy.
Lack of Focus on Critical Hiring Activities: TA functions lack visibility into which hiring activities have the greatest impact on QOH. Recruiters and hiring managers focus the majority of their time and effort on the middle selection part of the recruiting process, tending to neglect the more vital up-front planning, and then final conversion, and onboarding activities.
Driving QOH through the TA Process
The hiring workflow is fraught with complexity at all three stages – including more complex workloads, recruiting process, and hiring decisions – which slows hiring for high quality hires without necessarily having a corresponding improvement in quality. Organizations have the opportunity to improve TTF without compromising QOH by enhancing the talent acquisition process at critical points in the hiring process:
Defining Hiring Needs: TA professionals should use the TA Advisory mindset: influencing hiring managers on the type of hire sought and addressing misperceptions about the labor market to ultimately shape important decisions about each requisition. This includes conducting a job scoping review with hiring managers, helping them to replace unrealistically high screening criteria, and using behavioral interviewing to understand what they want. It means identifying what a high-quality hire looks like and then working backwards to assess what critical skills, knowledge and abilities are needed to achieve that.
Attracting High-Quality Candidates: Ways to achieve this include: making candidates aware of the job brand before they apply, profiling critical jobs in primary employment brand channels, and building recruiter skill in writing clear, compelling job postings.
Sourcing High-Quality Candidates: TA should customize sourcing approaches based on importance of each requisition, using knowledge of employees’ networks to generate better leads, build talent pipelines and gain proprietary intelligence from prospects. TA functions that practice strategic sourcing can expect higher quality shortlists than those that do not.
Reducing the size of the shortlist: Fewer (but better curated) choices mean better selection. TA functions can make it quicker and easier for hiring managers to decide by reducing the shortlist to three to five candidates. To build hiring manager confidence, TA professionals can show hiring managers strong resumes that didn’t make the cut because of specific limitations, highlighting the strengths of short-listed candidates and reminding managers of high-quality hires in their team who were chosen using the short-list method.
Assessing and Selecting High-Quality Candidates:To increase the role and organizational fit of hires, TA functions should consider training hiring managers on how to have candidates demonstrate what they can do in situations that reflect the real work environment.
Onboarding New Hires Effectively: As the value of talent increases over time, organizations need to ensure there is a robust onboarding program in place to convert candidates into employees and keep their quality hires in place. Onboarding begins at the moment the offer is accepted. New hires need to feel oriented to the organization, not just their job. By partnering with the hiring managers to keep candidates engaged from the point of hire, helping them build a network, preparing for orientation, and ensuring they have a roadmap for their time at the company, the TA function can ensure a successful onboarding.
Measuring quality on the same performance standard: Measuring pre- and post-hire quality on the same performance standard ensures consistency. For example, conducting exhaustive post-hire performance reviews at the 90-day, 6-month, and 9-month time periods for new hires. These reviews can be based on comparing the new hire’s performance against the performance objectives of the job. If the new hire falls short here, the reviews can be expanded to include an in-depth competency evaluation.
Driving QOH through the TA Team
Organizations can improve QOH by also attracting, developing, managing and retaining the right talent within the TA function:
Attracting TA Advisors: This means hiring recruiters who fit a TA Advisor profile, rather than being order-takers. Order-takers trust hiring manager assumptions, drive for satisfaction and aim to fill requisitions effectively. TA advisors, on the other hand, challenge hiring manager assumptions and use business acumen and analytics to influence decisions. They not only master the operational process of filling positions but also work actively to build talent pipelines and provide strategic consultation to hiring managers.
Enhancing TA Capabilities: Many TA professionals strive to be process experts. However, business and advisory capabilities matter far more than transactional aptitude in driving QOH. By accelerating experiential/on-the-job learning, organizations can boost TA Advisor capabilities. Introduce the importance of TA Advisor capabilities and obtain 360-degree feedback to diagnose these capabilities and performance.
Managing Requisition Workload: Many TA teams that don’t rely on external agencies have an above-optimal workload. While hiring for up to 20 open requisitions at a given time for volume or junior roles may be optimal, for hiring experienced candidates – the negative impact on quality can be dramatic. Reducing TA workload can improve performance.
Building TA Team Engagement: Communicating to TA staff about how their work impacts the broader organization and providing recruiting-specific talent management, can boost TA team engagement and performance.
Driving QOH through Hiring Manager Engagement
There is often a disconnect between hiring managers’ expectations and the TA function’s ability to deliver quality hires consistently. According to the CEB, the majority of recruiters (57%) feel that hiring managers do not understand recruiting, while an even larger majority (63%) of hiring managers feel that recruiters do not understand the jobs they are trying to fill.
It is critical to find the root of this disconnect and bridge the gap to truly deliver quality talent. In addition, the TA function needs to help hiring managers focus their time on activities that influence QOH and acting as Talent Advisors, with a special focus on showing hiring managers that hiring for organizational culture and team fit is more important than hiring for ability. Here are some ways TA can partner with hiring managers to improve QOH:
Attraction and sourcing: TA should show hiring managers the importance of culture and team fit and how to balance that with technical abilities. This means introducing hiring managers to the TA function’s purpose and process and clarifying their responsibilities in the hiring process (including needs definition, and getting referrals from their professional circles, among other responsibilities).
Assessment and Selection: TA should create actionable hiring manager training, teaching hiring managers how to ask effective behavioral questions, creating job simulations and reducing the number of stakeholders involved in selection decisions. Hiring managers should focus on having candidates demonstrate, not just describe their ability to do the job and following formal decision-making processes.
Candidate Care: Many of the activities that drive QOH the most – respecting candidates’ time, reaching a hiring decision quickly, providing accurate information, and converting candidates – are afterthoughts to hiring managers. For instance, almost one-third of hiring managers admit to giving candidates less than accurate information about the job, even though it can improve new hire performance significantly. Training hiring managers on what to emphasize during candidate assessment, showing them how to respect candidates’ time and using them to convert the best candidates to hires, will go a long way toward boosting QOH.
Onboarding: Giving hiring managers resources will provide new hires with a more complete onboarding experience. Most hiring managers overlook their onboarding responsibility or focus too narrowly on developing new hires’ technical skills. To drive QOH, hiring managers should provide information about the job before the new hire starts, respond to new hire concerns, explain performance objectives, and provide an early informal review.
Driving QOH through Employer Branding
With fierce competition for talent and nearly 80% of talent categorized as passive by LinkedIn, the question for talent acquisition leaders is: how do we raise awareness of the opportunities we are offering and make them a compelling proposition for the right quality of individuals?
A strong Employee Value Proposition (EVP) is key to achieving better QOH. Smart EVPs will attract the candidates you want while turning away those who would not make a good fit. Here are some initiatives that can support an organization’s success in increasing QOH through their EVP and building a strong strategy that makes them a potential talent magnet for target hires.
Knowing Who to Attract, Hire and Retain: TA functions can achieve this by identifying and interviewing their best and rising talent for their skillsets, attribute, attitudes and values. This also means understanding why they succeed, what trends they share within and across talent groups, their preferred online hangouts and communication preferences. Doing so allows organizations to devise personas for each of the target talent groups and determine where to invest in their brand and advertising and also how to structure communication with target candidates.
Tailoring The Messaging: The same message will not resonate or attract different target talent segments. By segmenting audiences using the personas already built, the organization website can include a section for new graduates and one for experienced hires. Prioritizing messages or emotional hooks that matter to target audiences is equally critical - it goes beyond money or title. Let’s not forget the value in being realistic about the organization’s strengths and opportunities.
Promoting Top & Rising Talent: Making top and rising talent the ambassadors of employer branding leverages the power of association. Letting them shine by sharing their personal stories demonstrates the culture, career progression and fulfilment they’ve achieved on the job. Using a variety of methods from videos to photo stories, sound bites to Q&As engages the various audiences.
Further Enhancing Employee Referral Programs: Few are better positioned to recommend quality hires than current employees. Making referral programs visible to employees by promoting it on relevant internal sites and driving internal campaigns boosts its use and importance to employees. Celebrating and publicizing successful referrals keeps the initiative on employees’ radar.
Enabling Seamless Two-Way Dialogue: Enabling dialogue via social media, networking evenings and personal connections strengthens relationships with potential candidates, enabling them to fulfil their due diligence needs and make an informed decision about the right company for them. For companies, establishing chemistry and rapport early in the candidate journey puts them in a stronger position than competitors who are less available or able to engage.
Break the Quality - Cost - Time Trade Off
An intelligent approach to talent acquisition and analytics is key to becoming an employer of choice and attaining or retaining competitive advantage. Organizations must find ways to reduce expenses while attracting and retaining a motivated, engaged and productive workforce. Measuring CPH is just one part of the overall equation for talent acquisition ROI. While cost is important to track, it shouldn’t come at the expense of quality.
PwC Saratoga notes that “the average cost of turnover for new hires is equivalent to one and a half times the annual pay of the departing employee.” While it might be tempting to spend less per hire to reduce costs, it is actually more expensive in the long run. According to Bersin by Deloitte, doubling spending per hire results in 40% lower new hire attrition and 20% faster time to fill. Finding the right mix for your organization can have a substantial impact on your QOH.
Since, QOH is essential to your organization’s success, start by defining who you want to attract, hire, onboard, and retain. Then improve upfront planning, conversion, and new hire onboarding. Build and strengthen relationships with hiring managers so they can effectively contribute to the recruiting process, in selection, hiring and onboarding.
There is no single metric that perfectly determines Quality of Hire. Start with a basic understanding of the traits that matter most to your organization, by role, location, and business unit, and improve the process as you learn. Begin with the end in mind by tying your measurements to business outcomes, and engage your CFO in identifying and measuring the right metrics.
QOH is yet another area of opportunity for TA functions to be the drivers and advisors of talent acquisition, rather than merely order-takers. Seize this opportunity to drive the value and measurement of QOH to both enhance business success and cement TA’s role as a strategic rather than an administrative, transactional and reactive function.
About the Author
Sadaf Pitt is a Talent Acquisition advisor whose career spans two decades across North America and Asia. She has held diverse roles in a variety of sectors before she discovered her true passion: Transformative & Strategic Talent Acquisition. She is a strong advocate for boosting Talent Acquisition’s voice and value in Asia’s leading MNCs. She is also an adult Third Culture Kid (TCK) and Multi-Local. Answering the question, "Where are you from?" is a tricky one for her. You can connect with her on LinkedIn or follow her on Twitter.
Her other posts include:
- "Where Are You From?" The Third-Culture Kid Dilemma
- Elevating Talent Acquisition Across Asia - The Need to Go Beyond Transactional & Reactive Recruiting Practices
- Elevating Talent Acquisition Across Asia - Moving from Order Taking to Being Consultative & Strategic
- Elevating Talent Acquisition Across Asia- Beyond Cost-Per-Hire: How to Boost TA’s Strategic Impact
Keywords: Talent Acquisition, Talent Management, Recruitment Transformation, HR Transformation, HR, Human Resources, Recruitment, RPO, Recruitment Process Outsourcing, HR Analytics, People Analytics, Talent, Recruiting, Hiring, Staffing, Cost Per Hire, Quality of Hire, Time to Fill, Talent Analytics