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Measuring recruitment performance: Why ‚Quality of Hire‘ should be your number 1 metric

Living in the age of big data and workforce analytics, we see performance measurement processes being applied in nearly every corridor of business life. While the initial adoption of HR performance measurement has been slow, we do see more and more HR and recruitment departments using metrics to assess process performance and establish areas for improvement (finally!). According to research by IBM, 90% of companies are currently using data-driven insights to rate their recruitment performance and drive strategic decisions. An encouraging figure – although I can’t help asking myself how many people only pay lip-service to the topic and why the remaining 10% still hasn’t crawled out from under their metric-less rock. At the same time, identifying the right set of key metrics to effectively measure recruitment performance can be quite a challenge. It may also differ from organization to organization. While I really don’t believe in a magic formula that can be applied across organizations and industries, I do find there is one metric in particular that should be part of your recruitment performance measurement at any time: Quality of Hire.

According to a recent IBM research, the top 5 metrics used by HR leaders and hiring managers are ’number of candidates‘, ‚time to hire‘, ‚cost per hire‘, ‚process adaptability‘ and, last but not least, ‚quality of hire‘. While this suggests that there is some awareness of the importance of this last metric, reality is that only a third of companies have taken concrete actions by actively measuring their quality of hire (Hudson RPO). Here are the top 2 reasons why this needs to change:

#1: Quality of hire data allows for process optimization

Hiring for quality is something totally different than just getting rid of open positions on your to-do list. No business owner wants to hire the wrong person for a job. However, according to Brandon Hall Group’s 2015 Talent Acquisition Study, 95% of companies of all sizes admit to making bad hires every year. An alarming figure considering the fact that a bad hire is not only a very costly mistake, but can also have a negative impact on worker morale, company culture, and overall performance. Since the consequences of hiring the wrong person go well beyond just the financial cost associated to it (sometimes estimated up to USD 50K), organizations should continuously evaluate hiring performance and optimize processes when necessary in order to mitigate risks. Using the quality of hire metric to identify and track a company’s bad and top hires, and how they were recruited, allows hiring teams to get a better understanding of success and failure areas in their processes and make strategic choices to improve hiring performance. This way, employers who actively measure quality of hire are able to make better hiring decisions and impact their company’s ability to realize its business goals.

#2: Quality of hire data enables hiring teams to demonstrate the value of HR

As employees play a critical role in a company’s competitive advantage and overall success, talent strategies should be created to support the business goals and be aligned with the aims of the company. While other metrics such as ‚time to hire‘ and ‚cost per hire‘ are obviously important as well, the “quality of hire” metric is one of the only metrics that directly correlates to a new hires‘ return on investment and contribution to a company’s success. While bad-hires can put a strain on the entire company, great hires can deliver exponential value and can have a great impact on the success of a company. Google has found that hiring a top-performing employee can result in 300 times more productivity and business impact. The quality of hire metric enables recruitment professionals to demonstrate the effect their hiring efforts have had on organizational initiatives and how their department is impacting an organization’s bottom line. For this reason, “quality of hire” is not just a recruitment metric but an essential business metric that can be used to justify strategic hiring decisions and influence senior leadership to manage HR budgets.

So if you only put one strategic item on your calendar for the next year, make it the “quality-of-hire” metric. It will put recruitment at the heart of your company, the place where it should be.

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