Quality check: better metrics improve HR's ability to measure—and manage—the quality of hires

HR Magazine, May, 2007 by Connie Winkler

Forget about gut feel or even cost-per-hire evaluations on new hires. "Quality of hire" is the new mantra for staffing and recruitment.

"HR is being told, 'OK, we've given you hundreds of millions of dollars to spend on an HR information technology system, to outsource, to set up shared services centers. So what does the business get out of it? Are we getting better employees, who perform at a higher level, who deliver more for the business?' " says Neil McEwen, who leads the U.S. people and organizational change practice at the Arlington, Va., office of London-based PA Consulting.

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Mostly, HR can point only to old efficiency measures pulled from silo applicant tracking systems (ATSs), typically around cost-of-hire, time-to-hire and employee retention rates. But while the emphasis on end-result metrics around human capital are relatively new and underutilized by many organizations, the widespread use and capabilities of ATSs means that companies have at least some of the data necessary to produce smarter quality-of-hire metrics. (For more information, see the HR Technology column in the March 2007 issue of HR Magazine.)

So the big question is: How do you measure quality of hire and set standards for new-hire performance?

Turns out there are lots of answers, especially from providers of recruiting technology, to assist HR in measuring--and managing--quality of hire.

High-Stakes Hiring

What are the stakes for realizing quality-of-hire success? Huge, says Dave Lefkow, CEO of Seattle-based TalentSpark, who consults on competitive use of HR technology. "We're essentially in an innovation economy where good people come up with really good ideas," Lefkow says, citing the example of the billions of dollars and transformation resulting from the work of Apple employee Tony Fadell, inventor of the computer company's red-hot iPod. "Companies want to hit home runs with the next greatest product," Lefkow says, "and the imperative is making sure you have great people to do that."

The attention to quality of hire also is being fueled by the impending wave of retiring baby boomers. "Larger organizations are focusing on quality of hire because they're really feeling the pinch of reduced numbers of candidates in their candidate pool," says Ginny Gomez, vice president of product management at PeopleClick, an international recruiting and staffing firm and technology provider with U.S. headquarters in Raleigh, N.C.

Given these factors, today's mission is dramatically different from how HR has been managed for the past 25 years, says Eric Tinch, global recruiting lead at Convergys, a Jacksonville, Fla., outsource provider. "At the end of the day, if it's going to improve quality and improve productivity--which improves profitability--who's going to argue whether it costs $500 per hire or $800 per hire?"

Industry watchers and consultants estimate that only 20 percent to 25 percent of organizations have quality-of-hire measurements. Nonetheless, in a 2006 survey of 150 HR groups by Authoria Inc., a talent management consulting firm based in Waltham, Mass., 70 percent of the respondents rated quality of hire as important and said their organizations planned to improve quality-of-hire measurements within the next 12 months.

Not surprisingly, suppliers are scurrying to expand ATS capabilities. Authoria, eContinuum, Kenexa, PeopleClick, PeopleFilter, Success Factors, Taleo, Vurv Technology and many others have or are developing recruitment systems that cover quality of hire. Likewise, outsource providers such as Accenture, Advanced Technology Services Inc., Convergys and IBM include such capabilities as part of their services models.

Getting Down to It

How quality of hire is measured varies, depending on the systems, companies and implementations involved. Authoria's Recruiting 2007 platform, for instance, provides a 1-to-5 rating scale used by hiring managers to evaluate how a new hire is performing after the employee's first 90 days. Other systems include an early 30-day checkup with subsequent feedback at three-, six-, nine- or 12-month intervals.

As part of its metrics initiative, computer giant Dell tracks more than 100 HR-related metrics globally and regionally. For quality of hire, the company gathers data on performance, retention, hiring-manager surveys, new-hire surveys and productivity.

Alice Snell, director of research at Taleo in San Francisco, says talent quality soon will become a key area on which organizational performance is judged. "In a few years, say three to six, some standards will emerge on how you measure and represent your talent management," she says. And when those new standards emerge, they may well be used by Wall Street to determine a company's valuation.

Recruiting software vendor Kenexa customizes the quality-of-hire evaluations to individual businesses and job descriptions. "In restaurants, for example, we can show that the best servers and managers drive ticket size," says Troy Kanter, president of Kenexa, based in Wayne, Pa. "By hiring better servers and managers in those units, they'll naturally bring up the average ticket size because they're better servers."