What is quality of hire?

Quality of hire: Definition

The reason companies are looking for additional team members is, in the best case, that of their continuous growth. They need new employees who have the knowledge (hard skills) and the abilities (soft skills), but also the necessary passion to drive the company forward.

Whether and to what extent new employees meet these requirements can be measured with one key figure: The quality of hire.

It tells us to what extent a newly hired person fulfils the requirements. Or, to put it in another way: How successfully the person contributes to the company’s growth. At the same time, the indicator also allows conclusions to be drawn about how carefully the recruiting team has selected and hired candidates.

For example, a high quality of hire score indicates that recruiting was a good fit (exactly the right talent was found). However, a low score indicates a poor choice (“it had to be done quickly” and “there were no better candidates”).

How is the quality of hire calculated?

Calculating quality of hire is a challenging exercise—especially since there is no single formula for doing so.

Instead, quality of hire is based on a performance assessment of the new team member, which is carried out after a certain period of time in the company.

Predefined assessment factors (metrics) are evaluated on a uniform scale (e.g., from 1 to 10) and added up. The result is then divided by the number of evaluation factors:

Quality of hire = (Factor 1 + Factor 2 + Factor 3 + …) / Number of factors

We’ll look at what these factors might be and how the whole thing works in practice in the next two sections.

What metrics go into quality of hire?

With quality of hire, various insights can be gained. In addition to the hiring quality of a single person, that of an entire group of new hires can also be measured.

But it can also be used to evaluate the quality of a particular approach to recruiting and the entire hiring process.

Consequently, many metrics (and one or two other recruiting factors) can be included in the calculation of hiring quality.

Metrics for people-related quality of hire

For people-related hiring quality, these metrics are the main ones that are used:

• Job performance
  
  The job performance rate expresses how successfully a newly hired person performs their tasks and how much they contribute to the success of the company.
  
  If the new team member has already achieved major milestones in their field within the set timeframe, this speaks for a great hire and deserves a high score.
  
  If they receive a low score, it means they are struggling in their role. For example, low performance could be a sign of being overworked, which tarnishes the quality of the hire a bit at first.

• Duration of onboarding (time to productivity)
  
  A recruitment process only ends when the new team member has been trained and integrated into the team. Consequently, the time that the new hire needs until he or she can independently fulfil his or her tasks (time to productivity) is also included in the quality of hire.
  
  Some team members are fully operational more quickly, others require a little more training and onboarding. Ideally, new hires with the required skills should have a short time-to-productivity and thus a high value.

• Cultural fit
  
  A metric that’s important for both team cohesion and the achievement of future business goals is cultural fit.
  
  It is a measure of how closely the new employee aligns with the company’s values and beliefs and how seamlessly he or she fits into the company’s culture.
  
  A high value indicates that the person is made for the company, fits perfectly into the team, and thrives in it. A low score suggests that the person has little or no connection and does not align with the company’s values.
  
  Do bear in mind that you shouldn’t let unconscious biases affect how you assess the cultural fit of a person. You can read more on this in our article about cultural fit vs. culture add.

• Employee engagement
  
  A company’s employees are the driving force behind achieving the company’s goals. The more satisfied they are, the higher their motivation and the more committed they are to the company.
  
  Therefore, the so-called employee engagement of a new team member should also be included in the assessment of hiring quality.
  
  For example, if the team member shows little or no commitment to achieving goals, this is a red flag—it indicates either dissatisfaction or a lack of alignment with the company’s values.

Metrics for method-based recruitment quality

To determine the quality of the recruiting method or process, these (and many more) metrics can additionally be included:

• Turnover rate
  
  The employee turnover rate indicates how long a newly hired person ultimately stayed with the company—or how quickly they had to be replaced. Ultimately, this also says a lot about the quality of the recruitment process.

• Channel effectiveness
  
  Channel effectiveness can be used to make statements about whether the recruiting team used appropriate channels to publish the job advertisements.
  
  The use of generalist job boards can increase the reach, but this alone does not always generate qualified applications.
  
  However, by using suitable niche job boards, for example via JOIN’s multiposting function, qualified talents can be reached even more effectively and in a more targeted manner.
  
  Which platforms are used ultimately determines the success and quality of the recruitment process. A high channel effectiveness is a promising quality feature for better recruitment success.

• Hiring satisfaction
  
  Hiring satisfaction indicates how satisfied the company’s recruiters were with the existing workflows. A low value indicates a need for action in terms of process optimisation.
  
  The more effective the workflow, the shorter the time to hire—and the better the chances of success in recruiting.

• Candidate satisfaction
  
  Candidate satisfaction is another important indicator of recruitment quality.
  
  The more satisfied the candidate was with the recruitment process, the better the recruiting team’s chances of achieving sustainable recruitment success in the future with the same approach.
  
  Candidates who were satisfied with the hiring process also do a better job of promoting their company and are more likely to refer the company to others in their circles, which can make talent acquisition even easier.

In this article, however, we will focus on people-related quality of hire and for this we will concentrate on job performance, time to productivity, cultural fit and employee engagement.

Calculation example

To calculate the quality of hire of a single newly recruited person, the above-mentioned performance evaluation must, of course, first take place on the basis of the defined scale.

For our calculation example, we assume the following values on a scale of 1 to 10 (where 10 is the best value):

• Job performance: 7 out of 10
• Time to productivity: 8 out of 10
• Cultural fit: 10 out of 10
• Employee engagement: 7 out of 10

When applied to the formula, the overall impression of quality of hire is as follows:

Quality of hire = 7 + 8 +10 + 7 (sum: 32) / 4 (metrics for evaluation) = 8

With the newly hired person, the recruiting team has thus gained a pretty good team member overall, who has settled into their role and the team relatively quickly, shares the company’s values, and is appropriately committed to its vision.

Again, however, individual cases are not representative! To get a meaningful impression of the quality of hiring, an average value should be used.

Why is quality of hire important?

Unfilled positions are expensive. However, the same is true for wrong staffing decisions, as they can cause a number of serious consequential problems:

• Enormous use of resources
  
  If a newly hired team member leaves after a short time (whether by choice or by dismissal), the search for candidates, the interview process, salary and contract negotiations, and onboarding start all over again.
  
  And with a completely new pool of candidates, because the second or third choice from the previous shortlist will probably have found a job by now.
  
  The search for a replacement thus consumes a lot of time and, of course, a lot of money. For reference, the average cost per hire is currently at least €3,500, depending on the position and sector often even much higher.

• Damaging reputation
  
  In addition, it does not reflect well on companies to reveal themselves as looking for new staff after only a short period of time. And don’t forget: People talk! And where employees leave so quickly, something must be going terribly wrong.
  
  In no time at all, rumours start, which can significantly reduce the attractiveness of applying to this company, making talent acquisition much more difficult in the future.

• Slowing down growth
  
  Another factor that should not be underestimated is the fact that by leaving the company in a timely manner, important projects are once again delayed, turnover is lost, and the remaining team members are burdened with additional work.
  
  This can lead to frustration, overwork and further resignations. In the worst case, this can even force companies to cut jobs, which hits young companies especially hard and massively slows down their growth.

• Tensions in the team
  
  As mentioned above, the cultural suitability of the applicant also counts as a quality criterion.
  
  If the new recruit subsequently turns out to be less suitable or difficult to handle, this can lead to tensions and conflicts, which jeopardises the effective cooperation of the team.
  
  If nothing is done about it, a toxic work environment is created, which can also lead to resignations—but not only from the newcomers, but also from older employees.
  
  Selecting and hiring quality candidates is therefore of utmost importance, not only from a financial point of view, but also in terms of the company’s image as well as its success.

How can companies improve their hiring quality?

The longer a vacancy remains unfilled, the more likely some recruiters are to be tempted by a “stopgap” solution. But this does not have to be the case, because the quality of hire can be increased with just a few measures:

• A meaningful career site
  
  Before potential candidates decide to apply, they want to get to know the company and its values a little—and they want to do this at a glance and in just a few clicks.
  
  The career site is a perfect medium for employer branding. The working environment, the team, the daily interaction, and the advantages of working together (benefits) can also be presented here in the best possible way.
  
  We show how a meaningful career page can look in our blog article How to create the best career page.

• Improve communication
  
  According to a 2018 study by Robert Half, 93% of new hires are willing to leave a company within the first 6 months if they don’t like the job. And 91% are even willing to leave within the first month if they don’t like the job after all (“early turnover”).
  
  Hiring companies should therefore first and foremost know and define exactly what they are looking for and communicate this very clearly in their job advertisement. Otherwise, there is a high probability that the applicant will not meet expectations afterwards.
  
  Transparency should also be ensured throughout the recruitment process, and care should be taken to ensure that communication does not leave room for misunderstandings or false expectations.

• Cultural add instead of cultural fit
  
  Birds of a feather flock together, as the saying goes. Of course, if candidates fit perfectly into the team, that’s great. But if everyone thinks and acts alike, it can also slow down a company’s innovation.
  
  Instead, recruiters should look for cultural add-ons, meaning candidates with convictions and skills that enrich the team culturally.
  
  This brings a breath of fresh air into the team, which can sweep across all departments and contribute to the continuous improvement of internal processes—including the hiring process.

• Use appropriate channels
  
  By using the right platforms, suitable and, above all, like-minded talents can be approached in an even more targeted manner. This also increases the quality of recruitment.
  
  JOIN, for example, makes it very easy for companies by providing data-based suggestions for suitable job boards, social media, and niche platforms.
  
  With just one click, the job ad is then published on 10+ free and selected premium job boards at particularly favourable rates.
  
  Channel effectiveness can also be easily tracked by the number of applications received per channel.
  
  Find out more about the many functions and advantages of JOIN on our how it works page.