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The talent acquisition function exists to make quality hires. Organizations are built around the people that make them up, and there is no function more critical to their long term success. Great hires are quite literally worth their weight in gold (often more). Poor hires, not so much. But there’s a discrepancy in the way we talk about “Quality of Hire.” Compared to metrics with universal application like “Time to Fill,” the way we refer to new hire quality changes depending on who we’re talking to. There are several metrics that talent acquisition uses to evaluate new hires, and different stakeholders often mean different things when they talk about it. In order create a level playing field, we’ve put together a rundown of the three most common definitions of “Quality of Hire,” and who the stakeholders are for each.
This one is commonly used to gauge turnover within the first year of employment, but can change depending on expectations for the role. Depending on the position and industry, a year might be too long or too short a time to evaluate new hire turnover. For example, seasonal positions might have an average tenure of only four months - in which case measuring yearly turnover probably won’t provide a whole lot of insight. On the other hand, positions that require lengthy stays will lean unfairly in the opposite direction. It’s a good idea to create timelines for each major position. Figuring out the average tenure for each position provides a starting point for evaluating future hires.
Losing employees is expensive. Depending on the role, losing an existing employee can cost anywhere between 16% - 200% of their annual salary, not to mention the less quantifiable hit to workplace morale. There are any number of reasons a role might experience a high rate of turnover, from poor management to poor quality hires. In order to get to the bottom of a high employee churn rate, you’re going to need to track additional metrics.
This metric measures candidate quality prior to hiring. As it is not tied to any on-the-job metrics, SBA gauges how effectively the recruiting function submits candidates the business likes. To calculate SBA, simply calculate the percentage of candidates accepted by the business vs the number of candidates submitted. For example, if the recruiting function submits ten candidates to move forward and the business accepts eight, SBA is 80%. Another commonly used metric that evaluates the efficacy of the recruiting function is the Submission to Hire Ratio (SHR). This is more specific than the SBA, as it compares the number of candidates submitted to the number of candidates hired (rather than the number of candidates selected to progress in the recruiting workflow). To calculate SHR, turn the number of candidates submitted vs the number of candidates hired to a ratio. If a recruiting function submits five candidates and one is hired, the SHR is 5:1.
Functions with a high SBA and SHR are successfully identifying the candidates that hiring managers need. Hiring managers have a lot on their plate. Pushing too many low quality candidates to the interview makes scheduling exponentially more difficult, and is an easy way to lose their trust. If the interview becomes a bottleneck from the number of candidate submissions, you risk losing the best candidates to organizations with less sluggish processes.
First Year Quality combines employee retention with Submissions to Business Acceptance Percentage. To calculate FYQ, find the average of employee turnover and SBA (X% + X% / 2). If new hire retention is 95% and SBA is 85%, First Year Quality is 90%. FYQ is useful because it evaluates the effectiveness of the entire hiring process.
The most variable of all quality of hire metrics. This is what most people outside of talent acquisition mean when they talk about new hire quality. In positions like sales, where each salesperson's performance is measured against a selling quota, evaluating new hire quality is simple. For positions with less definitive and measurable expectations, manager feedback might be the only metric to work with. Here are some examples of specific performance metrics:
Evaluating a new hire’s performance of job-specific duties is a great way to gauge their quality. If talent acquisition is consistently identifying top performers that go above and beyond, they’re doing something right - but you won’t get much visibility into what exactly is working. This is where the other “Quality of Hire” metrics come in.
It should be fairly clear by now that this is a trick question. Each metric measures a different aspect of the hiring process, and viewing them all together is necessary for getting a complete picture. Unfortunately, “Quality of Hire” tends to be used interchangeably to describe all of the above. So the next time anyone talks about measuring it, be sure to ask them to clarify.