Almost every business will agree that quality is more important than quantity when it comes to their employees. A recruiting blunder can act like a rotten apple inside the organization, damaging the company culture from the inside out and costing your business up to $240,000.

Moreover, after a 4.5% quarterly increase, labor costs jumped 5.1% year over year in 2022, the biggest annual increase since the current series began in 2001. Hence, employers must ensure that the increased cost will reap long-term returns to protect them from the impending recession. So, how can a company determine if its hire is adding qualitative value?

Understanding The Quality of Hire and its Importance

The term "quality of hiring" (or "QoH") refers to how much a new employee adds to a company's bottom line and how satisfied current employees are with that person's performance. You can't get better at something you don't measure, which is why measuring the quality of hire is crucial. If you have quality hiring metrics in place, you will have a better idea of where you can make improvements.

When the quality of hire is linked to other measures, it becomes possible to make data-driven improvements. Using metrics, a recruiter might discover that a certain source of hire consistently produces low-quality candidates. This realization would then guide the company's future hiring decisions.

Hence, businesses must monitor and assess the quality of hires over time to make sure the correct people are hired for the right positions. As a result, they may enhance hiring procedures and produce higher-quality candidates for the organization over time.

Metrics to Measure the Quality of Hire

There is no universal standard or one-size-fits-all approach for evaluating quality. That being said, due to the numerous factors that contribute to an effective hire, businesses often utilize a composite of metrics to determine quality. Here are some of the most effective and popular metrics to track.

1. Overall Performance

Almost half of all businesses use performance evaluations (or just performance) as a benchmark for new recruit quality. It is reasonable to take a new hire's performance on the job into account when attempting to evaluate their quality of work, despite the fact that performance appraisals might be subjective.

2. Employee Lifetime Value (ELV)

The overall net value an employee contributes to your company is shown by this more modern metric for evaluating hiring quality. The Employee Lifetime Value (ELV) of a worker is calculated by adding up their salary and benefits from the first day they are hired until the last.

3. Track The Retention Rate

The rate of employee retention is another common indicator of a hire's quality. Simply put, an employee's value to an organization increases the longer they remain employed there. This is why retention is often used as an effective metric for measuring hiring quality.

Here are some great metrics to utilize for measuring hire quality through retention:

• Replacement frequencies in positions of vital importance
• Rates of attrition among the top 15% of performers
• Staff turnover rates overall

Furthermore, it is essential to differentiate between deliberate and involuntary turnover with all of these measures.

4. Overall Productivity Levels

This metric is used in conjunction with the quality of hire metrics to determine the proportion of new hires who reach full productivity within the allotted period of time. For example, one metric that can be used to evaluate a new hire's performance is the percentage of targets met.

5. Tracking Hiring Manager Satisfaction

LinkedIn’s Future of Recruiting Report found that 41% of companies utilize recruiting manager satisfaction as a criterion of hire quality.  Surveys are the best tool to find out how satisfied an employer is with their hiring managers. For example, if a manager has five new employees, they will get and fill out five separate questionnaires. The topics of your queries should be around the satisfaction level with the employee's competency and the new hire's overall performance.

As with other indicators of hire quality, hiring manager satisfaction could be extremely subjective. It may be deceptive if used to evaluate a candidate's suitability for employment. This metric should be used in conjunction with the others presented here for the most precise results.

6. Compare Pre-Hire Metrics

To accurately assess a candidate's suitability for an open position, you need data from before and after they've been hired. The metrics taken into account before employment are essential for a comprehensive evaluation.

Pre-hire analytics allow companies to zero in on the root causes of recruitment-related issues before they impact the quality of new hires. In other words, if a company wants to improve the quality of its hiring, employers can't just wait for problems to arise; they have to take steps to do so proactively.

Conclusion

Reducing the frequency of poor fits improves the number of moderate or good fits, improving productivity and resulting in financial advantages. With that knowledge, it's simpler to see why an investment in the front end of the employment process (for example, improved advertising and more screening) is financially prudent.