QUALITY OF HIRE: THE ELUSIVE WORKFORCE METRIC
Presented by Mary Ann Downey
ABOUT THE PRESENTER
Attorney by training, Entrepreneur, Screen Writer, Human Resources expert; specializing in Organizational Effectiveness, Workforce Planning, HR Analytics, Diversity and International HR
Academic Bachelor Degree in History/Economics at Illinois State University
(Normal, IL) Juris Doctorate from Saint Louis University (St. Louis, MO) Master Degree in Human Resources and Industrial Relations from
University of Illinois (Champaign, IL)
Professional Ten years in large global organizations: Caterpillar (Peoria, IL),
General Motors (Detroit, MI) and ING (Atlanta, GA) Director for workforce productivity think tank: Institute for
Corporate Productivity (Seattle, WA) Started consulting firm in July 2011
Credentials Licensed to practice law in state of Illinois (since 1998) Published in People & Strategy Journal, Talent Management
Magazine and Diversity Executive among others Frequent presenter including Society for Industrial and
Organizational Psychology (SIOP), Human Resources People & Strategy (HRPS) and Catalyst Award
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ASK THE AUDIENCE
We are thinking about (maybe) starting to measure QoH
We are trying to measure QoH but cannot agree on the best methodology
We started measuring QoH but cannot agree what the metrics mean
We have a QoH metric but want to take it to the “next level”
We tried to measure QoH but have given up
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Where is your organization in the quest of measuring Quality of Hire (QoH) metrics?
QUALITY OF HIRE (QOH) AGENDA
Introduction - What is QoH and Why is it important to organizations?
How are organizations measuring QoH?
What are the barriers to effectively measuring and using QoH?
Recommend steps to adopt QoH in your organization
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MEASURING THE WORKFORCE Quality of Hire
External Talent Ability to effectively source, select and on-board new employees
Quality of Movement Internal Talent Ability to develop and create opportunities for current employees
(Transfers/Promotions) Quality of Selection
Internal & External Talent Ability to effectively source/develop, select and on-board employees
Time to Full Productivity Internal &/or External Talent Ability of a new employee to meet/exceed job qualifications
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MEASURING QUALITY OF HIRE
75%
16%
Should
Does
Overall
Results shown: High or Very High Extent Source: i4cp Talent Management Metrics Survey, May 2010
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It is an opportunity to gain a competitive advantage.
7%
22%
Does
High-Performing OrganizationsLow-Performing Organizations
HOW ARE ORGANIZATIONS USING QOH?
Evaluate immediate staffing outcomes Organization Recruiter
Assess the effectiveness of a tool, process change or candidate source
Quantify the workforce qualities
Predict (and intervene) in staffing outcomes
Evaluate manager talent identification prowess
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EVALUATING STAFFING OUTCOMES
“If an employee leaves within the first year – de facto that was not a quality hire.”
- Alexis Fink PhD, Organizational Consultant, Intel Corporation formerly with Microsoft Corporation
DOING THE CALCULATIONS
# of New Hire Terminations
in Reporting Period
# of New Hires in Reporting Period
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New Hire Termination Rate
# of New Hires - # of New Hire Terminations
in Reporting Period
X 100 X 100
New Hire Retention Rate
# of New Hires in Reporting Period
CHALLENGES TO CALCULATE
Did not starts (DNS) Are they coded correctly in the system? Should the DNS be included? Recommendation: Exclude from new hire calculation but calculate DNS separately
Interns/Temporary Employees Are they coded correctly in the system? Should temporary employees be included? Recommendation: What is most important to your organization - that the numbers “tie” or perception of the calculation?
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CHALLENGES TO CALCULATE (CONT.)
Inherit differences between roles Entry level roles are “expected” to turnover faster than more
professional or senior roles Effort to recruit roles differs based on required skills and
availability
Be conscious of these differences when comparing rates against different business units, recruiters, etc.
Recommendation: Calculate by Job Code, Family, Bands or (in the US) EEO-1 category
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CHALLENGES TO CALCULATE (CONT.) Timing
QoH does not reveal itself immediately (unless it is a really bad hire) Calculating requires looking backward for at least two years
Reorganizations Organization structures are dynamic which makes year-over-year
comparisons difficult Do not create reporting by leaders (people) or by artificial organization
structures Geography Functions Employee Type
Recommendation: Create exclusive QoH reports which are updated quarterly to spot trends and can be analyzed based on history (apples-to-apples)
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EDUCATION INDUSTRY EXAMPLE
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2012 Hires
as of 03/13
as of 06/13
as of 09/13
as of 12/13
2011Actual
2010 Actual
2009 Actual
Overall Termination Rate 13.8% 11.7% 7.2%Number of New Employees Hired 640 580 525 410Number of 1st year Terminations 186 152 134 89New Hire Termination Rate 29.1% 26.2% 25.5% 21.7%
Northeast Region 211 44.0% 39.5% 37.8% 32.2%Southeast Region 160 28.8% 30.2% 31.8% 27.9%Midwest Region 141 12.8% 10.1% 8.9% 7.2%West Region 128 22.7% 15.1% 13.8% 11.6%
Faculty 448 24.1% 26.3% 25.1% 20.3%Campus Staff 152 46.1% 32.6% 31.8% 32.1%Corporate Staff 40 20.0% 12.1% 10.8% 13.5%
2013Hires Q1 2013 Q2 2013 Q3 2013 Q4 2013 2012
Actual2011
Actual2010
Actual2009
Actual7 35 39 44 29
4.5% 5.5% 6.7% 8.4% 7.1%
14.9%
Did Not Starts 155
B2B PROVIDER EXAMPLE
2012 2011 2010
Overall Termination Rate 16.6% 15.2% 14.1%New Hire Termination Rate 24.5% 29.6% 29.0%Number of New Hires 1,617 1,337 1,213Number of First Year Terminations 396 395 351Overall New Hire Term Ratio 1.48 1.95 2.06
Entry-Level Positions 27.8% 33.9% 39.4%Established Positions 18.1% 17.7% 16.2%
Executive & Management 10.0% 12.0% 22.0%Professional 17.5% 16.2% 15.5%Technicians 21.2% 23.6% 22.5%Sales Workers 25.5% 39.0% 42.1%Administration 27.5% 26.1% 24.1%
Number of Interns Hired 62 40 30Number of Intern Conversion 32 14 9Intern Coversion Rate 52% 35% 30%
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OTHER METHODS TO EVALUATE STAFFING OUTCOMES
Performance Ratings Some organizations review performance rating distribution
exceeds expectations, meets, needs improvement Challenge is confidence in performance rating process
Promotions Some organizations review how quickly or number of
promotions Challenge is intervening circumstances/time between hiring
decision and promotion
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THE FORMULA APPROACH
Quality of Hire = (PR + HP + HR) / N PR = Average job performance rating of new hires HP = % of new hires reaching acceptable productivity with
acceptable time frame HR = % of new hires retained after one year N = number of indicators
Example:
PR = Average 3.5 on a 5.0 scale = 70%
HP = Of 100 hires made one year ago, 75 are meeting acceptable productivity levels = 75%
HR = 20% turnover = 80% HR
N = 3
Quality of Hire = (70 + 75 + 80) / 3 = 75
Source: Steve Lowisz, President and CEO, Qualigence, Inc.; http://www.recruitingtrends.com/quality-of-hire-the-top-recruiting-metric/
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QUANTIFICATION OF THE WORKFORCE
Assessing if the workforce is becoming more skilled and talented
Determine what identifiable traits would factor into a “workforce capability” equation Years of Experience Type of Education Quality of Education Credentials
Scored former and new employees to determine if the workforce was getting “better”
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PREDICTING “SUCCESSFUL” STAFFING OUTCOMES
Frustrated with QoH being a lagging indicator – quantify in “real” time the success of the hire
Survey hiring manager about the process and the early performance of the new hire Would you hire this person again?
Survey the new hire about the process and the culture of the organization Would you accept this position again?
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PREDICTING “SUCCESSFUL” STAFFING OUTCOMES (CONT.)
Challenges:
Will managers and new hires be “honest”?
Should HR intervene in a “At Risk” situation?
“Survey” fatigue?
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BOTH PARTIES
SAY “YES”
BOTH PARTIES
SAY “NO”
PARTIES DISAGREE
GOOD HIRE
AT RISK HIRE
BAD HIRE
ASSESSING THE SELECTION TOOL
Examined the relationship between selection tool results and new hire performance measures
Evaluation forms sent to hiring managers between 3-9 months after hire (dependent on employee segment)
Compared objective and subjective quality data against the selection tool results to validate the results and recommend future strategy
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Use performance criteria to evaluate selection tool results.
ASSESSING THE SELECTION TOOL (CONT.)
Objective performance
Subjective Competency Leadership Managing Execution Building Relationships Generating Talent and
Organization Capability
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Data Gathered
Learning and Applying Personal Experience
Subjective Quality Ability/Job Fit Motivation Fit Speed to Performance General Performance
Rehire Likelihood
THE HIRING BATTING AVERAGE
Evaluating manager hiring prowess
Idea from a Jack Welch column http://www.welchway.com/Management/People-
Management/Hiring Right/The-Hiring-Batting-Average.aspx
Every candidate is evaluated by 3 people beyond the hiring manager
The evaluators give each candidate a “hire”/ “don’t hire” recommendation
Six months later the hiring manager evaluates new hires with a “exceeds,” “meets” or “below”
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THE HIRING BATTING AVERAGE (CONT.)
Example Give 10 “hire”
recommendations 6 are “meeting” or
“exceeding expectations” .600 hba
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Calculate hiring recommendations with performance.
Benefits Identify talented “talent
spotters” Empower and engage
current employees Improve the on-boarding
process for the new hire
WHY AREN’T WE?
“Quality” is a subjective term – one size rarely fits all
There is no clear measuring stick (benchmark)
It takes resources and effort to measure
The accountability hot potato – if the metric is “bad” – who is “at fault” – Staffing or Management?
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So, if we all agree that we should measure QoH, why aren’t we?
QUALITY IS IN THE EYE OF THE BEHOLDER.
A “quality” hire is dependent on the role, department, and even the economy.
There are a number of factors that if improved can signal a quality hire Longer Tenure Promotable (Time to Promotion) Increase Productivity Manager Satisfaction/Assessment Additional Credentials Compensation/Cost
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WHAT IS YOUR “HIRING PHILOSOPHY”?
Not only is “quality” dependent on the role/function/ work team…it is also dependent on organizational hiring philosophy…
If your organization has invested in a number of assessment tools both skill and personality based…then your “quality expectation” will be higher than an organization that hires for “culture” such as Zappos or Southwest which expects and encourages employees to “wash out” early.
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THE BEST BENCHMARK IS AGAINST YOURSELF.
Rather than looking for external benchmarks (which will differ widely) organizations should look Across similar business units By geography Over time (year over year) By hiring manager
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CREATE A MEASUREMENT PLAN.
For each measurement - what is the purpose? To investigate (diagnostic) Create accountability (scorecard) Evaluate performance (scorecard) To monitor (dashboard)
A good measurement can only have one master
Need a one/two reporting period “grace” period before instituting accountability/ performance measures
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COMMITMENT TO MEASUREMENT IS NEEDED.
TO WHAT EXTENT DOES YOUR ORGANIZATION HAVE A “WORKFORCE MEASUREMENT STRATEGY”?
20% Results: High or Very High Extent
Source: i4cp Talent Management Measurement Survey, May 2010
Organizations get what they put into measurement. Dedicate resources Buy-in to survey Commitment to act
(judiciously)
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WHAT DO HIGH-PERFORMING ORGANIZATIONS DO?
Create and communicate a strategic plan
Secure appropriate buy-in from leadership
Segment the workforce and concentrate on the problem or value-added positions
Dedicated (and highly skilled) resources Statistician IO psychologist
Customize measurement criteria by segment
Align HR function around the measurement plan
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YOUR NEXT STEPS What is your organization’s Hiring Philosophy? Does your organization have an Employee Value Proposition? What is your organizations viewpoint on talent identification and
development? Who is interested in Quality of Hire?
Head of HR Recruiting Leader Senior Leadership Team Line Management
Are employee segments already identified? How sophisticated is your human capital data? Create and document your Measurement Strategy
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TIPS FOR SUCCESS
Be clear about why you are investing in measurement Diagnosis Evaluate Create accountability Predict
Determine feasibility for your organization
Capture a baseline measurement
Set goals or create hypothesis (what will good look like)?
Tailor reports to audience need and appetite
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EXAMPLE
2012 2011 2010Retention of New Hires
Overall Termination Rate 16.6% 15.2% 14.1%New Hire Termination Rate 24.5% 29.6% 29.0%Number of new hires 1,617 1,337 1,213Number of first year terminations 396 395 351Overall: New Hire Term Ratio 1.48 1.95 2.06
PerformancePerformance is assessed by Hiring Manager - 4 months after start date
% of New Hires that Exceed Expectations 15.0% 12.5% 11.5%% of New Hire that Meet Expectations 74.5% 75.0% 73.5%% of New Hires that Do Not Meet Expectations 10.5% 12.5% 15.0%
Culture FitCulture Fit is assessed by the Employee & Manager through Opinion Survey
% of "Good" Hires 79.5% 78.5% 76.0%% of "At Risk" Hires 13.0% 15.5% 15.0%% of "Bad" Hires 7.5% 6.0% 9.0%
Employee Development & MobilityWorking for Organization 75.5% 70.5% 56.5%Progression Promotion n/a 10.6% 15.9%Transfer/Promoted n/a 2.7% 7.9%
Consolidated Quality of Hire Report This is the cover sheet for a
series of reports that are produced on an annual basis
This report requires the following HRIS data Hire Date Term Date Promotion Transfer
This report uses data acquired from opinion surveys Hiring Manager New Employee
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RECOMMENDED READING
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DEFINING HIGH PERFORMANCE
These companies performed better over the past five years, based on these four indicators:
1. Revenue growth
2. Market share
3. Profitability
4. Customer satisfaction
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i4cp defines high-performance organizations consistently outperform most of their competitors for extended periods of time.
SOURCES OF POOR QUALITY
Cited in: Quality of Hire – The Next Edge in Corporate Performance. Taleo (2004)
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DRIVING QUALITY
Cited in: Quality of Hire – The Next Edge in Corporate Performance. Taleo (2004)
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