Why Cost Per Hire Is a Dumb Metric and Quality of Hire Is Not

In all the brouhaha about great new sourcing initiatives and Web 2.0 tools, how much have your recruiters and hiring managers improved their ability to hire great people, not average people?

In my opinion, we’ve downplayed what it really takes to be successful in our profession — recruiting, counseling, and closing top people who have multiple opportunities, and making sure our hiring manager clients don’t blow it.

To start refocusing on the right stuff, I’d like to nominate quality of hire as the metric to assess recruiting department performance, and relegate cost per hire to the second page.

I believe cost per hire is a misguided means to judge recruiting department performance. For one, it rewards the wrong things and ignores quality of candidate and quality of hire. For another, it’s far too tactical and narrowly focused. Worse, improving costs could degrade quality.

This is a strategic mistake of huge proportions that too many HR and recruiting managers miss entirely.

These problems go away if the focus is on measuring quality of hire first and quality of candidate as a subset. Even if recruiting is reluctant to take on the responsibility of maximizing quality of hire, it must be responsible for setting up a system to measure it. While important, measuring quality of hire is not straightforward.

Here are some ideas on how to get started on thinking about how to do it:

Yves Lermusi, the CEO of Checkster, believes good reference checking before (external) and after the hire (internal 360°) might be the best way to measure, monitor, and improve quality. He might be right, but from what I’ve seen, if the measure of candidate quality pre-hire is different than after the hire, you’re not measuring the same thing. Regardless, Yves’ point of measuring candidate quality post hire and monitoring are absolutely essential. So you should check out Checkster as a means to do this.

Here’s another perspective. I was speaking with a senior recruiting manager with a Fortune 100 company the other day. She told me her company conducted exhaustive post-hire performance reviews at the 90-day, 6-month, and 9-month time periods for new hires. These reviews were based on comparing the new hire’s performance against the performance objectives of the job. If the person fell short here, the review was expanded to include an in-depth competency evaluation. This approach seemed spot on to me. However, the recruiting manager told me under-performance was generally attributed to lack of understanding of real job needs before accepting the offer and problems with culture, especially with the working relationship with the hiring manager, once on the job. This strengthens the argument of measuring pre- and post-hire quality on the same performance standard.

However, some differ on this view. For example, after a recent ERE article I wrote on a related quality of hire article, someone sent me a detailed LinkedIn message describing his company’s approach to measuring the quality of their candidates by sourcing channel. It consisted of a detailed scorecard examining a set of criteria that mapped to the traditional job description. This included things like quality of the academic background, quality of the experience, depth of industry knowledge, and the like. This is probably not too bad, but I suspect that this was not the focus of the interview. But none of this gets at the issues involved in a post-hire quality assessment. For example, the person could be a fine person with all of the experience and academic requirements noted, but someone who was no longer motivated to do the type of work required, or someone whose style was not compatible with the hiring manager’s.

From a pre-hire standpoint, some might argue that the traditional competency or behavioral-based interview is a great way to measure pre-hire quality. My 30-year concern with this is that it still ignores job performance and managerial fit. Being competent to do the work doesn’t mean being motivated to do the work. Nor does competency or behavior measure a person’s ability to prioritize the work, handle too much work, work under pressure, work with different resources, work with comparable teams in similar situations, or work with a weak manager.

For me, it’s pretty easy to conclude that if you want quality of hire to become a useful measurement tool, you must start by measuring pre- and post-hire on the same basis. Further, the measurement standard you should use must be made on some comparison to real job needs. (Send me an email if you’d like a copy of a performance-based talent scorecard from my book, Hire With Your Head (Wiley, 2007).) This means candidates need to be measured before they’re hired on their ability and motivation to perform the actual work required, including fit with the hiring manager.

Article Continues Below

If pre- and post-hire quality measures are different (up or down) it means that the assessment process is flawed. So it’s important to use feedback from the post-hire quality assessment to change how candidates are assessed. I suspect that few companies do this; regardless, that’s a major reason and benefit for measuring post-hire quality. Then once pre- and post-hire quality assessment are the same and you have a good system for tracking quality of candidate and quality of hire, you can then move on to the more strategic quest of maximizing quality of hire. This includes improving your recruiting and sourcing skills in tandem, and tracking quality by sourcing channels, recruiters, and even hiring managers.

The whole point of this article is to suggest that quality of hire is a much more important measure than cost per hire in measuring recruiting department performance. While cost is important to track, it shouldn’t come at the expense of quality.

Focusing on the internal budget of the recruiting department is insignificant in comparison to the impact the thousands of people the recruiting department hires has on their company. What’s more exciting is that the tools are now available to actually measure and maximize hires, rather than just talk about it.

About the Author

Lou Adler is the CEO and founder of The Adler Group – a training and search firm helping companies implement Performance-based Hiring℠. Adler is the author of the Amazon top-10 best-seller, Hire With Your Head (John Wiley & Sons, 3rd Edition, 2007). His most recent book has just been published, The Essential Guide for Hiring & Getting Hired (Workbench, 2013). He is also the author of the award-winning Nightingale-Conant audio program, Talent Rules! Using Performance-based Hiring to Build Great Teams (2007).

  • http://pharmaceuticalmanagementresources.com barbara goldman

    You are right, focusing on quality is critical. But it is impossible to measure.

    Over the past few years, corporations are finding that they have to use recruiters to fill positions that historically, are positions that can be filled by themselves.

    It is confusing, and a lot of firms are opening up new doors to recruiting by offering our services in non-traditional recruiting areas.

    Bravo to these recruiters!

    A big problem that we have in those cases is justifying the fee.

    How much is the position worth to the corporation? Few internal recruiters know. When placing an entry level engineer, is that person worth 500,000 a year to the company, 1M a year? If that individual is bringing value to the company, what is the big deal? The company is better off filling the position, and paying fees than the opposite. But, if the person you are working with in the corporation doesn’t understand the concept, or know the number, it’s an uphill battle.

    The focus in corporate recruiting should be, “How much value does this position bring to the company?” Not, what is the cost per hire?

    All companies know this information, but when looking at a fee, or deciding to pay a fee, reason goes out the window in many cases.

    The recession, and the layoffs have given companies the wrong impression about who is available. Lots of resumes, lots of busy work processing resumes, but where are the quality people?

    Our clients don’t understand what we do. Our clients don’t understand that few people hired to be recruiters can actually ‘make it’. It takes intelligence, drive, tenacity, and market savvy. On top of that, you have to work like a horse, and be an amateur psychologist.

    The bottom line, in my humble opinion, quality is almost impossible to measure, no matter what formula is used to determine such a thing.

    We can’t guarantee that our candidates have drive, that our candidates will succeed. All we know is that our candidates are performing the same job for a competitor. The real question is, “how much is the position worth to the company when filled”? Then, as the months go by avoiding fees at any cost, someone needs to be fired, and a new hiring strategy needs to be addressed by actually looking at the numbers.

  • http://www.linkedin.com/in/alanstrauss Alan Strauss

    In my conversations with TALC members, I often hear how recruiting managers want to be more respected and have more influence within their respective employers. While I agree that developing “true” ROI metrics is difficult, I do content that it is a must for the next generation Talent Acquisition organization. If recruiting leaders want to get more access to corporate executives, they must develop metrics that align their organizations with real business objectives. Cost per hire is an administrative HR metric; return on investment or quality of hire can be aligned with a corporate strategic business objectives.

    Thanks Lou!

    -Alan

    Alan Strauss
    Founder
    Talent Acquisition Leadership Council
    alan@startfinder.com

  • Patrick Foss

    Bravo for continuing the QUALITY discussion!

    The challenge for HR in measuring quality is the ‘inspect in’ approach taken by most organizations. Measuring the entire process and key decision points are the only ways to improve the decisions being made. While vendors have been pitching the ‘supply chain’ aspects of the recruiting process and their software, the reality is any manufacturing organization with the failure rate of HR in advising on selection would be shut down immediately.

    As you touch on, HR needs to use measures that identify who recommends well (recruiters) and who selects well (managers). Analytics around this information should be visible and actionable – get help for those who struggle and leverage those who excel. Quality is an organizational metric owned by everyone, not handed off when the person starts.

    Until HR adopts the core concept of ensuring quality on the input side of things, we will continue to struggle with business credibility and true demonstration of value added services.

    Now is a great time to examine your tools and their intended purpose – who do they serve, do they deliver, and can they be leveraged more.

    Thanks again for the article and I look forward to much more lively discussion regarding Quality in the coming months.

  • http://www.careersinholland.com Niels Jordens

    This is a non-issue in my humble opinion. A hire should be quality, else it shouldn’t be a hire, should it? This has no relationship with costs of recruiting as such. Costs and quality are both different dimensions. Let’s assume there are 3 major criteria: quality, time and costs. As: when recruiting you should be getting in the best candidates in the shortest period of time for the lowest costs. Now let’s assume you focus on the best quality. Then you could still take a look at how to keep the ability to hire the best quality, but in less time and/or at lower costs (well, we all know time is money…). Which actually can be done when making smart use of web 2.0 and what not. If a recruitment department can limit the cost per hire whilst maintaining or even raising quality, that’s a good thing isn’t it? So both criteria could happily co-exist. I propose to use the phrase “cost per quality hire”, although I repeat: if a hire isn’t quality it shouldn’t have been a hire.

    Furthermore I strongly believe that post-hire quality is not a measure of the recruitment department but of the company as a whole (culture, style of management etc.), however this depends on who actually makes the hire (recruitment or management?). Therefore measuring quality when it comes to the recruiting itself could very well be measured by the amount of qualified and motivated candidates being brought in, and them being enthousiastic by virtue of the recruitment departments approach and response. Recruitment could get in loads of quality candidates, no matter the costs. However if people keep leaving after 6 months I suggest to take a good look further up the organization.

  • Juntee Terrenal Ma,GMS

    One of the issues why there is no correlations between cost per hire and quality of hire because many Staffing Managers and HR Managers who are doing these functions do not understand what they really mean.

    They know how to talk about these but they do not know how to leverage both concepts into a strategic functions to increase the performance of their Staffing organization. Many says they are strategically approaching staffing but look the type of people they bring into their organization. Effective recruiting and screening with imperative strategy to build an A+ organization must demonstrate the quality of talents and not measuring on the number of hires per a given period and reducing or managing the cost of hiring.

    You can manage the cost of hiring if you have the right strategy ..

  • http://www.enticelabs.com/ Joshua Westover

    There are so many great points in this post Lou. Thanks for continued contribution to this space!

  • http://www.q4b.com Scott Beardsley

    Like some of the other responders, I am glad to see that Quality of Hire is the top issue on the minds of the Recruiting inudstry, as it should be. However, I am not sure I woudl call Cost per Hire “dumb”. The way some compies use the metric may be dumb, but you cannot ingnore the cost factor. Recruiting is a process. Liek any process the first priority is QUALITY output. Once you are able to establish Quality, then you move into a continuous improvement phase that allows for you to preserve the quality while reducing the costs. So, I guess I am agreeing that Quality comes first. But the second question that will be asked, once quality is delviered, is..how much did it cost? As a company Leader, I would expect my Recruiting Leader to be accountable for providing the thought leadership and implement the tools and processes that will get more efficient over time. Any measures to reduce cost per hire below a level that will compromise the quality benchmark that was established, should be banned as an option.

  • Lou Adler

    Using the talent scorecard you’ll be able to measure quality of candidate during the screening and quality of pre-hire when deciding to make an offer or not. In addition you’ll be able to use the same scorecard to measure quality of candidate post-hire.

    With that said, I’ll refute the person who said it’s impossible to measure of quality of hire.

    Next, I’ll go on to say that quality of hire is so important and requires the active involvement of the whole hiring team, that you won’t even care about cost/hire – it is a dumb metric – if you pull it off. As far as I’m concerned effort should not be wasted on pursuing the wrong goal.

    No one will care if you spend more if you can truly prove that you’re improving quality of hire. Also, no one will give you a pat on the back for reducing costs if quality of hire doesn’t improve. However, once you get quality of hire improved, then focus on time to fill – this is next in line in order of importance, since it does impact the company. Cost/hire only impacts the recruiting department. That’s why I think recruiting has to emphasize the stuff that impacts the whole company, not a minor budget expense line.

  • Kelly Magowan

    Thank you Lou, this is a great article about quality, which is too often excluded from the recruitment process. Time and cost seem to be the prevailing words, with quality coming in at the end.

    The ‘cost’ problem is endemic of the society we live in, where people want more for less. Cost plays a huge role in our lives where often the mantra is the cheaper the better, without factoring in the quality aspect of the service we engage or the product we purchase. Our thinking is increasingly short term, which is no different within businesses and HR. Who is setting these measurements is it the executive team or the HR department? As one comment was made “Cost per hire is an administrative HR metric; return on investment or quality of hire can be aligned with a corporate strategic business objectives.” Is this happening?

    With so much recruitment being transactional and cost focused, too often the quality is not the priority. No doubt this is not helped by increasingly high staff turnover figures, making it even harder for those recruiting to be held accountable. I concur that the quality of hire is the number one priority. Cost of hire is a necessary measurement however should never be rated above that of the quality of hire. How can an organization innovate and create a sustainable competitive advantage with a workforce of cheap to hire average or poor performers?

    One of the comments made succinctly describes the ideal model “The focus in corporate recruiting should be, “How much value does this position bring to the company?” Not, what is the cost per hire?” It would be interesting to know what companies are doing this – are measuring the value of each employee?

  • Kunal Malhotra

    I agree with Neils comment that this is a non-issue. If at all there should be a metric then it should be based on “engagement” value of an employee and not quality because

    1. Quality is a subjective and relative measure
    2. Quality is not easily quantifiable

    Agree, that there are frameworks out there such as 360 degree evaluation which let you measure quality (to an extent) but in my humble opinion they are again based on emotional responses of the respondents, which make the data subjective.

    This post also assumes “a one size fits all” position, which doesn’t recognise an individual company’s current state and doesn’t take into account their current challenges.

  • Lou Adler

    The more I ponder it, I’ve got to say LOUDLY that not only is cost per hire dumb, it’s more dumb than I originally thought. Of course, you need to manage total costs, but managing it on a cost per hire basis is absolutely the wrong way to do it. It’s like the software department measuring cost per line of code or accounting measuring the cost per balance sheet produced. Creating metrics for the sake of having metrics is misguided.

    Managing recruiting department budgets efficiently is one thing, but using this to determine success or failure is another. In my mind it’s an indication that the department is out of touch with their prime role – maximizing candidate quality and quality of hire.

    And if you’ve ever placed a great person, a good person, an average person and a bad person, you absolutely know you can measure quality of hire. Metrics measuring these differences are essential.

  • http://www.linkedin.com/in/alanstrauss Alan Strauss

    I can’t agree with Lou more… I don’t want to be confrontational, but cost per hire is not only a dumb metric, it should be insulting to all of us in the industry. I hear over and over again how recruiters and recruiting leaders do not want to be treated like administrative professionals and that they want to be treated like strategic partners. Cost per hire is an administrative metric that was developed when recruiters were considered HR professionals.

    The industry needs real metrics that measure business impact, value to the organization, impact to shareholder value, ect…Most importantly, whatever metrics TA leaders can develop must align to a company’s overall business objectives.

    This is an important debate. Keep up the fight Lou!

    Alan Strauss
    Founder
    TALC
    alan@startfinder.com

  • http://www.q4b.com Scott Beardsley

    I know several sofware firms that measure cost per line of code. One particular SW firms told me last week that they dropped their cost per line of doce from $120.00 per line to $5.00 per line by implementing a global bidding network to produce their code. So, Lou, it is not far fetched, as you insinuate in your last post. There are a lot of people and insudtired that have figured out how to make the metric work for them. Too bad we, in recruiterworld, after hundreds of years of eveloving the profession, still have not figured it out.

    Again, I generally tend to agree with you, but the word “dumb” incites me, especially when I am being told from a so called industry expert, that something I beleive in is “dumb”. That is a bad word to choose, albeit I tend to agree with the concept.

  • http://www.hughesvaladez.com John Hughes

    Cost per hire can be pretty interesting if you have a sourcing scorecard as a variable. We measured sources(inclding spend) on approximately 400 exempt hires a year for four years. It helped us focus our dollars and determine best use of our time and energy…not to mention it made a nice tie ino quality of hire…interesting results here. The business found it interesting as well as we could expalain how we found talent as well as costs associated with it…net was it became easier for us to get budget allocated for sourcing programs because we could explain cost per hire in a what made practical sense.
    Quality of hire is a “thornier” metric but I would agree as critical. The issue is ensuring the opinion of a few is taken out of the equation and hard metrics are used…this will exclude most companies from producing an accurate measurment. Biases end up playing a large role without the hard work getting done on the front side to really determine what success looks like in a role. HR must see it as a priority as well as they often times own the development/succession piece and have most of the available data on individuals.

  • http://pharmaceuticalmanagementresources.com barbara goldman

    We can talk about quality, what does it mean?

    My company recruits in the pharmaceutical, biotech and health care industries.

    How does one measure the quality of the hire? Let’s say I place a pharmacist at a hospital. That particular pharmacist makes mistakes, or doesn’t make mistakes in the pharmacy. We can measure the errors, and compare them against industry average. That is one tangible way to measure the hire. What if that pharmacist doesn’t stay on the job? What if a pharmacist catches an error that a doctor made, and saves a life? But what if that same pharmacist makes a small mistake, one that nobody notices? What if that same pharmacist is someone who sucks the life out of everyone around him with his negative personality or anti-social behavior?

    If a pharmacist saves a life because a doctor made a mistake, how much is that worth to the hospital? To the patient’s family? Let’s say the next day, the same pharmacist, who is human and full of human frailities, overloads a baby with heparin?

    This is real life, not some crazy measurement.

    What if a great hire, a quality person, leaves the company at the 13th month of employment, but during that time brought value to the company? Is that a quality hire, or not?

    Quality is easier to measure in sales. If a new salesperson brings important accounts with him, but doesn’t expand the company by going after new business, is that a good hire?

    Ok, let’s look at biotech. What if a researcher develops a molecule that brings millions into the company? What is the cost of not hiring that person? What if a researcher works for years only to be turned down by the FDA? Is that a bad hire? What if that same persons creativity, and good attitude motivates everyone around him, and THEY develop a molecule that works?

    Healthcare is another good example. How fast can a nurse scoot down the hall to deliver pain meds? Slowly, but surely? Or quickly so that the patient ‘feels’ taken care of, and spreads goodwill about the hospital?

    What if that same researcher who made millions for the biotech company, has an attendence problem? Is that a bad hire/ or a good hire. What if everyone who works with him can’t stand him, and it causes other researchers to quit?

    We can put numbers on anything, and what we are measuring is subjective. The reason that executives are so frustrated with HR, is because they don’t get it.

    Talk to executives, who aren’t sitting around in HR measuring people, what matters? What is the CEO measuring? How is she measured? Bringing value to shareholders? At what cost?

    Now here’s a good question for you. Let’s say a hospital is short staffed in the pharmacy? What does it cost the hospital? Does anyone care? I do. Because I know. Mistakes are made, the pharmacists who are on the payroll are frustrated and tired, and people die. But, cost per hire might be down. And, when the hospital did hire, they hired quality people. But for what good?

    One more thing to consider. I am in the middle of placing an executive at a failing company. They are worried about the fee. There will be no company if the molecule doesn’t pass FDA muster. And, if they can’t afford a fee, they can’t afford my candidate. My candidate is a proven scientist who has been in front of the FDA hundreds of times. Now, what is the company thinking? Cost per hire? What about quality? How do we measure? What if, after all is said and done, my candidate does work for the company, and still can’t get FDA approval? Is this a quality hire?

    The problem with HR is not understanding what makes a quality hire, but going ahead and measuring it anyway.

    Again, what is the position, when filled worth to the corporation? Does the candidate just by doing the job bring value?

    Please, HR people! Anyone teaching recruiting needs to work a desk, and talk to executives. Anyone in HR who is trying to come up with measurements about quality might be satisfying some strange requirement, but it is IMPOSSIBLE to measure. Cost per hire? PLEASE, maybe you can do that for menial jobs. Quality? Well, I still say impossible to measure.

  • http://www.hthworkforce.com Heidi Burkley

    Barbara,

    I enjoyed reading your response; you certainly have provided food for the thought. In my humble opinion one of the biggest mistakes made in hiring decisions is the failure of HR and the HM to properly identify the key measurements needed to select the right individual with just the right skills and ability to accomplish a set goal. For example, simply stating you are seeking a “superstar” and listing a series of exhausting and rigid requirements is not enough. By the way, this may lead to a poorly executed selection process, higher turnover, lower moral, dissatisfied employees, decreased productivity and a highly negative work environment. I would argue that often we look at the wrong measurements to decide whether or not a person is the best fit for a certain role.

    While I agree with you that it’s difficult to measure the quality of hire, I disagree with you that it’s impossible. I personally believe that hiring decision based upon a holistic perspective will yield higher ROI vs. a tactical and choppy approach that’s heavily weighted upon non essentials. Essentially I believe it’s ineffective to place a top performer in a role without properly thinking through how this individual will add value to the overall organizational objective and goals. For example (I’ll keep it simple) if a role required the individual to drive operational productivity what would the quality measures be to determine the individual’s success or failure rate?

    Customer Service
    • Reduced complaints
    • Positive customer feedback
    Operation
    • Reduction in inefficiencies, waste and defects
    • Greater output
    Health and Safety measures
    • Reduction in Injuries
    • Reduction in Accidents

    As you can see, these components can be measured and they have an indirect impact on organization and financial results. Ultimately, if the individual in this role can decrease inefficiencies, drive output, and contribute to organizational growth then one can assume that’s a quality hire. Again you must look at the overall picture, determine what skills are needed to accomplished the required goals and seek out QUALIFIED people.

    These are just my humble thoughts….

    Heidi

  • Lou Adler

    Heidi – don’t be humble – your points are 100% right on! To measure quality just ask the hiring manager what A level people do in comparison to B level and in comparison to C level. That make sure the answers can be validated.

    For a pharmacist is might be working odd shifts, accurately filling Rx, checking all Rx against the Rx db for incompatibility, training assistants in the store, using new technology, staying current on latest drug trends, speaking at a conference, no turnover, and so on.

    The point is there is a measurable difference in performance for all jobs from 16 year old camp counselors at the YMCA, to FedEx delivery folks and senior engineers designing the new Reaper drone. The more important point is that recruiters and hiring managers need to know what these differences are so they can measure them during the interview. (Note – make sure you download the talent scorecard to see how this is used to rank candidates against real job needs.)

  • http://www.hughesvaladez.com John Hughes

    Not that simple Lou. Often times the hiring manager is not an A player themselves. To sipmly ask them the difference between A, B and C level will not be enough. (It is a needed data point.) Sometimes entire companies are comprised of B and C players. They may think they are A or may not even know where they truly fall. The focus in developing a strong quality of hire metric must be real data that all see as factual and tangible. Otherwise it will be dismissed as conjecture and fluff.

  • Joshua Letourneau

    Now you’re talking, John – your injection of reality and clarity is appreciated. Assuming we can define quality properly, and assuming that a Hiring Managers can properly identify it, would throw out any and all notions of “fit”. Ah, yes, “fit” – the ultimate safety net for the ‘real reasons’ candidates are passed over; the reasons that get logged in minds, yet never make it to paper, email, or the Talent Management System. “Fit” allows for all the rules to be tossed out, including all the ‘data points’ and ‘performance criteria’, etc. Oh, and if “fit” is the reason for disqualification, it’s pretty easy to rate the interview and all data points lower than they really are! A little ‘gaming’ with your coffee this morning, everyone? 🙂

    I continue to be shocked that Cost per hire is still used as the primary KPI in Recruiting. I mean, seriously, Cost per hire? Articles about the weakness of CPH date back eons, yet we’re still discussing, so perhaps there is too much white noise in the market to see the forest through the trees.

    P.S. When those at the VP of Talent Acquisition level start having conversations beyond CPH, watch what will happen: The rest of the market will follow suit . . . but until leadership buys in, articles on the futility of CPH will still make it to ERE in 2050.

  • Lou Adler

    John – While it takes some effort, it actually is relatively simple to measure quality even when the hiring manager is a C level person – just ask if there’s a difference between the best people that work in the group and the worst. Then define these differences – these become the performance objectives of the A-level person. For example,

    at a F100 sales group of 75 sales managers, 2/3 were average or below managers, yet their A level sales people all made quota with six months, all increased their territory growth rates by 10-12% per year, and all made 8-10 presentations per month to CIOs at F1000 companies. We measured candidates on their comparable past performance to determine the quality of hire on a pre-hire basis. However, we did have to move the effort to attract these people to a higher level manager.

    At a major F100 company that manages hospital pharmacies we conducted a job analysis at three of their best pharmacies to see what the best pharmacists do. Surprisingly, the only difference in performance between those that worked for weaker managers was their lack of need for support from their bosses.

    The point of all this is to say that quality of hire can be measured for any job for any manager as long as you decide not to make excuses about why it can’t be done. We’ve done this for over 500 jobs in the past 20 years, and the hiring managers were representative of the good, the bad and the ugly.

    By understanding what the best people do in the particular job is the key here, irrespective of the manager. Then you need to make an adjustment for managerial differences, and find people who can still perform at high levels despite a weak manager.

  • Joshua Letourneau

    Lou, quick question as I’m interested here – the foray into performance analysis could be a learning opportunity for many, myself included —

    You speak to analyzing data points in performance (i.e. “all increased their territory growth rates by 10-12% per year”, etc.) . . . however . . .

    It’s easy to identify the competencies, behaviors, accomplishments, etc. of high-performing professionals already employed at the organization. A simple regression analysis would yield many insights.

    However, here is the draw – here is the real meat and potatoes of the conversation:

    How do we analyze these high-performing traits, competencies, behaviors, etc. from a interviewing standpoint. Obviously, the data points couldn’t be consistent – there are too many variables to account for. Growing territory sales 10% – 12% per year at a mature organization may be impressive, yet is extremely weak for an early-stage organization. It’s a simple analogy, but a relevant one. As such, there would be subjective analysis involved . . . because unless all other variables were equal, the interview/experiment/assessment would be greatly compromised.

    Thoughts?

  • Lou Adler

    Joshua – I have never look at the competencies or behaviors first. I always understand the results required for success first. Some people use different skills, behaviors and competencies to achieve the results, so this logical distinction is essential. I then measure the candidates’s past results in comparison to the results expected for an A level person. This is how we calculate QoH pre-hire.

    Here’s the performance based interviewing methodology we train hiring managers to use to do this – http://budurl.com/1qiv. The information from all of the interviewers is summarized on this 10-factor talent scorecard – http://budurl.com/agwb.

    Email me directly (lou@adlerconcepts.com) if you want to discuss this in more detail.

  • Lou Adler

    Joshua – I have never look at the competencies or behaviors first. I always understand the results required for success first. Some people use different skills, behaviors and competencies to achieve the results, so this logical distinction is essential. I then measure the candidates’s past results in comparison to the results expected for an A level person. This is how we calculate QoH pre-hire.

    Here’s the performance based interviewing methodology we train hiring managers to use to do this – http://budurl.com/1qiv. The information from all of the interviewers is summarized on this 10-factor talent scorecard – http://budurl.com/agwb.

  • Joshua Letourneau

    Thanks, Lou – very insightful and much appreciated.

    Let me ask another crazy question:

    Do you recommend trigger dates for QoH post-hire, such as 3-months, 6-months, 12-months, 18-months, etc.? This would be more inline with ‘performance reviewing’ than ‘QoH post-hire’ . . . .

    However, I like the notion of ‘QoH post-hire’ as it allows for linking back to ‘predicted QOH’ (aka QOH pre-hire).

    I would imagine it would be further interesting and insightful to identify when and where ‘predicted QoH’ was accurate or inaccurate relative to actual performance. This would then lead to the question, “Why?” . . . at which point you could get to the crux of what’s really going on with the workforce. The deviations in predicted versus actual could hold tremendous benefit.

  • Lou Adler

    Joshua – I’m off to Chicago – the quick take – evaluate post-hire as many times as you want – it is a mini-performance review using the 10-factor scorecard as the guide. Since pre- and post- is measured in comparison to real jobs needs you can pinpoint problems right away. These could be weak interviewing skills or poor definition of the job or a real problem with the hiring manager, as John pointed out.

    Regardless, you still know the problem areas that need to be corrected.

    Best,

    Lou

  • http://www.hughesvaladez.com John Hughes

    If it was as simple as you suggest we would not be having this discussion today. It is an issue of the organization as well as the manager…with many variables. I agree that it is critical but requires more effort and work than what is done typically today in most corporations. Having led large recruiting teams in mult-billion dollar companies I can tell you that it is tougher to move this needle than suggested in this article. I have seen it embraced by some leaders and dismissed by others with the same results offered to each. Conceptually it certinly makes sense but until biases and opinions can be fully removed the quality metric will not be embraced as it should be. External benchmarks and standards need to be introduced to fully remove the internal company biases.

  • http://www.hthworkforce.com Heidi Burkley

    Lou,

    One of the companies I worked for used Balance Score Cards. Essentially our performance was based upon a series of metrics. If you know what needs to get accomplished then I would think that you can build a hiring/interview process around those metrics.

    I googled Balance Scorecard and found some interesting links. Heidi

    “The Balanced Scorecard is a performance management approach that focuses on various overall performance indicators, often including customer perspective, internal-business processes, learning and growth and financials, to monitor progress toward organization’s strategic goals. Each major unit throughout the organization often establishes its own scorecard which, in turn, is integrated with the scorecards of other units to achieve the scorecard of the overall organization.”

    http://managementhelp.org/org_perf/bal_card.htm

    https://www.balancedscorecard.org/BSCResources/AbouttheBalancedScorecard/tabid/55/Default.aspx

  • http://www.linkedin.com/in/alanstrauss Alan Strauss

    I contend that there is a bigger debate here than how to measure quality of hire. If recruiting executives want more influence within organizations, they need to find ways to better measure their importance-period! Corporate organizations that show a CEO how they can increase shareholder value, revenue, or profit margins (to name a few) are always going to have more influence within a company than those organizations that don’t. This is one of the biggest factors why CEO’s always talk about attracting talent, but provide Talent Acquisition with limited resources, and often conceal their organizations within HR.
    I am not making any judgments on the ease or difficulty of this task. In fact, I am currently consulting to a Fortune 100 company on how to develop more scientific metrics and it will probably take 12-24 months to implement.

  • Lou Adler

    All – great discussion! It all goes back to the title of the article – Why Cost Per Hire Is a Dumb Metric and Quality of Hire Is Not. Most people don’t get this, that’s why they haven’t tried to improve Quality of Hire.