Better metrics improve HR's ability to measure--and manage--the quality of hires.
Forget about gut feel or even cost-per-hire evaluations on new hires. “Quality of hire” is the new mantra for staffing and recruitment.
“HR is being told, ‘OK, we’ve given you hundreds of millions of dollars to spend on an HR information technology system, to outsource, to set up shared services centers. So what does the business get out of it? Are we getting better employees, who perform at a higher level, who deliver more for the business?’ ” says Neil McEwen, who leads the U.S. people and organizational change practice at the Arlington, Va., office of London-based PA Consulting.
Mostly, HR can point only to old efficiency measures pulled from silo applicant tracking systems (ATSs), typically around cost-of-hire, time-to-hire and employee retention rates. But while the emphasis on end-result metrics around human capital are relatively new and underutilized by many organizations, the widespread use and capabilities of ATSs means that companies have at least some of the data necessary to produce smarter quality-of-hire metrics. (For more information, see the HR Technology column in the March 2007 issue of HR Magazine.)
So the big question is: How do you measure quality of hire and set standards for new-hire performance? Turns out there are lots of answers, especially from providers of recruiting technology, to assist HR in measuring—and managing—quality of hire.
What are the stakes for realizing quality-of-hire success? Huge, says Dave Lefkow, CEO of Seattle-based TalentSpark, who consults on competitive use of HR technology. “We’re essentially in an innovation economy where good people come up with really good ideas,” Lefkow says, citing the example of the billions of dollars and transformation resulting from the work of Apple employee Tony Fadell, inventor of the computer company’s red-hot iPod. “Companies want to hit home runs with the next greatest product,” Lefkow says, “and the imperative is making sure you have great people to do that.”
The attention to quality of hire also is being fueled by the impending wave of retiring baby boomers. “Larger organizations are focusing on quality of hire because they’re really feeling the pinch of reduced numbers of candidates in their candidate pool,” says Ginny Gomez, vice president of product management at PeopleClick, an international recruiting and staffing firm and technology provider with U.S. headquarters in Raleigh, N.C.
Given these factors, today’s mission is dramatically different from how HR has been managed for the past 25 years, says Eric Tinch, global recruiting lead at Convergys, a Jacksonville, Fla., outsource provider. “At the end of the day, if it’s going to improve quality and improve productivity—which improves profitability—who’s going to argue whether it costs $500 per hire or $800 per hire?”
Industry watchers and consultants estimate that only 20 percent to 25 percent of organizations have quality-of-hire measurements. Nonetheless, in a 2006 survey of 150 HR groups by Authoria Inc., a provider of integrated talent management solutions based in Waltham, Mass., 70 percent of the respondents rated quality of hire as important and said their organizations planned to improve quality-of-hire measurements within the next 12 months.
Not surprisingly, suppliers are scurrying to expand ATS capabilities. Authoria, eContinuum, Kenexa, PeopleClick, PeopleFilter, Success Factors, Taleo, Vurv Technology and many others have or are developing recruitment systems that cover quality of hire. Likewise, outsource providers such as Accenture, Advanced Technology Services Inc., Convergys and IBM include such capabilities as part of their services models.
Getting Down to It
How quality of hire is measured varies, depending on the systems, companies and implementations involved. Authoria’s Recruiting 2007 platform, for instance, provides a 1-to-5 rating scale used by hiring managers to evaluate how a new hire is performing after the employee’s first 90 days. Other systems include an early 30-day checkup with subsequent feedback at three-, six-, nine- or 12-month intervals.
As part of its metrics initiative, computer giant Dell tracks more than 100 HR-related metrics globally and regionally. For quality of hire, the company gathers data on performance, retention, hiring-manager surveys, new-hire surveys and productivity.
Alice Snell, director of research at Taleo in San Francisco, says talent quality soon will become a key area on which organizational performance is judged. “In a few years, say three to six, some standards will emerge on how you measure and represent your talent management,” she says. And when those new standards emerge, they may well be used by Wall Street to determine a company’s valuation.
Recruiting software vendor Kenexa customizes the quality-of-hire evaluations to individual businesses and job descriptions. “In restaurants, for example, we can show that the best servers and managers drive ticket size,” says Troy Kanter, president of Kenexa, based in Wayne, Pa. “By hiring better servers and managers in those units, they’ll naturally bring up the average ticket size because they’re better servers.”
Kanter reports that employers such as Sitel, Sears Canada and United Rentals Inc.—by having applicants take pre-screening tests on personality, experience, critical thinking and problem-solving—have cut turnover in some job categories to 30 percent to 40 percent from 60 percent to 70 percent when they focus on quality of hire.
Kanter also says that now that companies can measure how many quality hires a recruiter brings on board, they will start to reward top talent agents. “We’re trying to get our customers to think about their recruiters as talent agents and pay them for their ability to bring in good talent,” says Kanter.
Another development that helps improve quality of hire is for businesses to give recruiters advance notice of likely requisitions, instead of showing up on the doorstep needing someone hired three weeks ago, says Authoria’s Mike Galyen, product manager, recruiting, in Waltham, Mass. Instead, Authoria’s Recruiting 2007 platform not only has hiring managers rating new hires but also enables them to report expected positions on an actionable organization chart. Recruiters then can review those charts and collaborate with managers to learn more and to begin sourcing—as opposed to just pulling resumes off job boards or other last-minute scrambling.
Dell’s Systematic Approach
At Dell, human resource executives and recruiters will soon have on-screen, dashboard capability to view recruiter scorecards, which evaluate how recruiters perform based on a checklist of metrics, including measurements linked to quality of hire.
About 18 months ago, the challenge of sheer growth led Dell to pursue a data/metrics initiative, especially since much of the growth was outside the United States. Dell’s 2006 employee population of 63,700, at 287 sites in 51 countries, is expected to jump to 78,700 by the end of this year. The company’s emphasis is on maintaining both quality talent and diversity.
Given this surge, it was HR, along with Dell’s data-driven culture, that prompted the question, as expressed by Elsa Zambrano, senior manager of global talent acquisition at the company’s headquarters outside Austin, Texas: “Is the recruiting function really adding value to the organization? And, more importantly, do we have evidence that describes the reality, good or bad?”
At the time, specific businesses and managers within Dell had no global view of their group’s hiring; each region or country produced and kept its own metrics, there was no sharing of results or best practices, and there was no global recruiting program in place. Outside the United States, all hiring reporting was done manually (frequently on Microsoft Excel spreadsheets). Until two years ago, when the company installed Taleo’s ATS, U.S. talent acquisition relied on Dell’s internal IT group to develop and maintain its recruiting system.
The ATS’s initial findings were on measurable efficiencies such as cost of hire and retention. Dell asked Taleo to partner with the company to develop a customized, more complex recruiting analytics platform that rolled up data globally, including hiring-manager evaluations on both the candidates’ quality and the recruiters’ experience, sourcing data, and diversity of the submitted candidates’ evaluations.
Using these data, Dell managers are able to correlate high and average performers with sources of those applicants to determine where best to find quality hires. This input is used to support specialized recruiting efforts such as employee referral programs and university recruiting programs.
Currently, Dell is implementing the second version of the recruiting analytics platform, which will conduct new-hire evaluations at 30 days on the job, incorporating recruiting, communications, on-boarding and other evaluations that make up more than 100 metrics.
“The great thing is that across the world, Dell talent acquisition has a common language, a common understanding and common targets,” says Zambrano, who attended many of the international meetings ironing out the system’s kinks. “That’s very difficult to do in a global organization.”
The system also has given Dell’s talent acquisition team a deeper understanding of what constitutes quality of hire, Zambrano adds. “Our recruiters across the globe have a good, reasonable template about what we say is good [in a hire].” ›
Studying Sources Of Quality at Reuters
At international news organization Reuters, the hiring challenge for HR was wooing the same high-value financial employees that rich brokerage and financial services firms are able to recruit. Hiring managers currently are asking for better-quality candidates, but recruiting is under cost pressures, says Stephen Schwander, director of global HR projects at Reuters in St. Louis.
“From the quality standpoint, we’re seeing a lot more effort around how we can get an ‘agency-quality hire’ without paying agency-quality rates,” Schwander says. His technology team believes the ultimate answer is to use a mix of recruiting sources, but there’s a catch: There are no measurements of how well varying candidate sources perform around the world.
“I’m really pushing the concept of quality of hire because I believe recruiting is somewhat agency-dependent,” says Schwander. “If we can track the metrics, then we can [compare] the quality of agencies and the quality of other sources.” The recruiting challenge for Reuters, as at Dell, is huge and pivotal. The London-based company has regional recruiting centers in St. Louis, the United Kingdom, Poland, China and India.
About five years ago, after agency spending was cut by 70 percent, Reuters installed an ATS from Hire.com (since acquired by Authoria), and by 2005 agency placements accounted for about 11 percent to 17 percent of new hires—down from 30 percent when the new system was installed.
Reuters turned to Authoria’s Recruiting 2007 platform, and by July it expects to be collecting new metrics on the quality of its hires. HR can then begin comparing regions and job titles, looking for what sources and best practices work best in each region. But Schwander is also pushing for the next cut: surveying hiring managers at 90 days to find high performers that can be fast-tracked into career development programs.
Schwander admits that implementing a single, unified global program is a rocky road, especially in Asia, where it’s still easier and cheaper to throw lots of bodies at a problem than to identify the best sourcing options. “The quality-of-hire metric is going to do more in Asia than the days-per- or cost-per-hire did in the past,” he says. Reuters is also betting on regional shared services offices to support administration.
Evaluating Skills Vs. Competencies
If it’s easy to get lost in such complex implementations, the bigger danger may be in losing sight of the big picture: finding the right workers.
Unlike the clichéd accounts of how the chairman started in the mailroom, companies need to recognize that the skills of a good mailroom attendant probably aren’t those of a CEO. Increasingly, companies are moving toward competency hiring vs. skills hiring, says Michael George, product evangelist at Vurv Technology in Jacksonville, Fla. George says companies “are willing to give up on skills necessary to do the job, in favor of leadership competency, or problem-solving [competency], because those things translate into future leadership.”
Likewise, companies need to be aware of over-automating their systems, so that the best people aren’t discarded because their resumes don’t perfectly match some predetermined profile. “There’s danger in over-automating and thinking that someone’s resume is a real indication of who they are,” says consultant Lefkow. “One of the biggest complaints I hear from candidates and job seekers in the last few years is that things have been so heavily automated, sometimes the most qualified people end up in the trash heap without really knowing how they got there.”
Connie Winkler writes about HR and technology management from Seattle. She has authored two books on high-tech careers.