From Mary Ann Downey Presented at ILSHRM13. Titled Quality of Hire The Elusive Metric

1. QUALITY OF HIRE:
THE ELUSIVEWORKFORCE METRIC
Presented by Mary Ann Downey

2. ABOUTTHE PRESENTER
Attorney by training,
Entrepreneur, Screen
Writer, Human
Resources expert;
specializing in
Organizational
Effectiveness,
Workforce Planning, HR
Analytics, Diversity and
International HR
 Academic
 Bachelor Degree in History/Economics at Illinois State University
(Normal, IL)
 Juris Doctorate from Saint Louis University (St. Louis, MO)
 Master Degree in Human Resources and Industrial Relations from
University of Illinois (Champaign, IL)
 Professional
 Ten years in large global organizations: Caterpillar (Peoria, IL),
General Motors (Detroit, MI) and ING (Atlanta, GA)
 Director for workforce productivity think tank: Institute for
Corporate Productivity (Seattle, WA)
 Started consulting firm in July 2011
 Credentials
 Licensed to practice law in state of Illinois (since 1998)
 Published in People & Strategy Journal,Talent Management
Magazine and Diversity Executive among others
 Frequent presenter including Society for Industrial and
Organizational Psychology (SIOP), Human Resources People &
Strategy (HRPS) and Catalyst Award
2

3. ASKTHEAUDIENCE
 We are thinking about (maybe) starting to measure QoH
 We are trying to measure QoH but cannot agree on the best
methodology
 We started measuring QoH but cannot agree what the metrics
mean
 We have a QoH metric but want to take it to the “next level”
 We tried to measure QoH but have given up
3
Where is your organization in the quest of measuring Quality of
Hire (QoH) metrics?

4. QUALITYOF HIRE (QOH)AGENDA
 Introduction - What is QoH andWhy is it important to
organizations?
 How are organizations measuring QoH?
 What are the barriers to effectively measuring and using QoH?
 Recommend steps to adopt QoH in your organization
4

5. MEASURINGTHEWORKFORCE
 Quality of Hire
 ExternalTalent
 Ability to effectively source, select and on-board new employees
 Quality of Movement
 InternalTalent
 Ability to develop and create opportunities for current employees
(Transfers/Promotions)
 Quality of Selection
 Internal & ExternalTalent
 Ability to effectively source/develop, select and on-board employees
 Time to Full Productivity
 Internal &/or ExternalTalent
 Ability of a new employee to meet/exceed job qualifications
5

6. MEASURINGQUALITYOF HIRE
75%
16%
Should
Does
Overall
Results shown: High orVery High Extent
Source: i4cpTalent Management Metrics Survey, May 2010
6
It is an opportunity to gain a competitive advantage.
7%
22%
Does
High-Performing Organizations
Low-Performing Organizations

7. HOWAREORGANIZATIONS USINGQOH?
 Evaluate immediate staffing outcomes
 Organization
 Recruiter
 Assess the effectiveness of a tool, process change or candidate
source
 Quantify the workforce qualities
 Predict (and intervene) in staffing outcomes
 Evaluate manager talent identification prowess
7

8. EVALUATING STAFFINGOUTCOMES
“If an employee leaves within the first year –
de facto that was not a quality hire.”
- Alexis Fink PhD, Organizational Consultant, Intel Corporation
formerly with Microsoft Corporation

9. DOINGTHECALCULATIONS
# of New Hire
Terminations
in Reporting Period
# of New Hires
in Reporting Period
9
New HireTermination Rate
# of New Hires -
# of New HireTerminations
in Reporting Period
X 100 X 100
New Hire Retention Rate
# of New Hires
in Reporting Period

10. CHALLENGESTOCALCULATE
 Did not starts (DNS)
 Are they coded correctly in the system?
 Should the DNS be included?
Recommendation: Exclude from new hire calculation but
calculate DNS separately
 Interns/Temporary Employees
 Are they coded correctly in the system?
 Should temporary employees be included?
Recommendation:What is most important to your organization -
that the numbers “tie” or perception of the calculation?
10

11. CHALLENGESTOCALCULATE (CONT.)
 Inherit differences between roles
 Entry level roles are “expected” to turnover faster than more
professional or senior roles
 Effort to recruit roles differs based on required skills and
availability
 Be conscious of these differences when comparing rates against
different business units, recruiters, etc.
Recommendation: Calculate byJob Code, Family, Bands or (in the
US) EEO-1 category
11

12. CHALLENGESTOCALCULATE (CONT.)
 Timing
 QoH does not reveal itself immediately (unless it is a really bad hire)
 Calculating requires looking backward for at least two years
 Reorganizations
 Organization structures are dynamic which makes year-over-year
comparisons difficult
 Do not create reporting by leaders (people) or by artificial organization
structures
 Geography
 Functions
 EmployeeType
Recommendation:Create exclusive QoH reports which are updated quarterly to
spot trends and can be analyzed based on history (apples-to-apples)
12

13. EDUCATION INDUSTRY EXAMPLE
13
2012
Hires
as of
03/13
as of
06/13
as of
09/13
as of
12/13
2011
Actual
2010
Actual
2009
Actual
Overall Termination Rate 13.8% 11.7% 7.2%
Number of New Employees Hired 640 580 525 410
Number of 1st year Terminations 186 152 134 89
New Hire Termination Rate 29.1% 26.2% 25.5% 21.7%
Northeast Region 211 44.0% 39.5% 37.8% 32.2%
Southeast Region 160 28.8% 30.2% 31.8% 27.9%
Midwest Region 141 12.8% 10.1% 8.9% 7.2%
West Region 128 22.7% 15.1% 13.8% 11.6%
Faculty 448 24.1% 26.3% 25.1% 20.3%
Campus Staff 152 46.1% 32.6% 31.8% 32.1%
Corporate Staff 40 20.0% 12.1% 10.8% 13.5%
2013
Hires
Q1 2013 Q2 2013 Q3 2013 Q4 2013
2012
Actual
2011
Actual
2010
Actual
2009
Actual
7 35 39 44 29
4.5% 5.5% 6.7% 8.4% 7.1%
14.9%
Did Not Starts 155

14. B2B PROVIDER EXAMPLE
2012 2011 2010
Overall Termination Rate 16.6% 15.2% 14.1%
New Hire Termination Rate 24.5% 29.6% 29.0%
Number of New Hires 1,617 1,337 1,213
Number of First Year Terminations 396 395 351
Overall New Hire Term Ratio 1.48 1.95 2.06
Entry-Level Positions 27.8% 33.9% 39.4%
Established Positions 18.1% 17.7% 16.2%
Executive & Management 10.0% 12.0% 22.0%
Professional 17.5% 16.2% 15.5%
Technicians 21.2% 23.6% 22.5%
Sales Workers 25.5% 39.0% 42.1%
Administration 27.5% 26.1% 24.1%
Number of Interns Hired 62 40 30
Number of Intern Conversion 32 14 9
Intern Coversion Rate 52% 35% 30%
14

15. OTHER METHODSTO EVALUATE STAFFING
OUTCOMES
 Performance Ratings
 Some organizations review performance rating distribution
exceeds expectations, meets, needs improvement
 Challenge is confidence in performance rating process
 Promotions
 Some organizations review how quickly or number of
promotions
 Challenge is intervening circumstances/time between hiring
decision and promotion
15

16. THE FORMULAAPPROACH
Quality of Hire = (PR + HP + HR) / N
 PR = Average job performance rating of new hires
 HP = % of new hires reaching acceptable productivity with
acceptable time frame
 HR = % of new hires retained after one year
 N = number of indicators
Example:
 PR =Average 3.5 on a 5.0 scale = 70%
 HP =Of 100 hires made one year ago, 75 are meeting acceptable productivity levels = 75%
 HR = 20% turnover = 80% HR
 N = 3
 Quality of Hire = (70 + 75 + 80) / 3 = 75
Source: Steve Lowisz, President and CEO, Qualigence, Inc.; http://www.recruitingtrends.com/quality-of-hire-the-top-recruiting-metric/
16

17. QUANTIFICATION OFTHEWORKFORCE
 Assessing if the workforce is becoming more skilled and
talented
 Determine what identifiable traits would factor into a
“workforce capability” equation
 Years of Experience
 Type of Education
 Quality of Education
 Credentials
 Scored former and new employees to determine if the
workforce was getting “better”
17

18. PREDICTING “SUCCESSFUL”STAFFING
OUTCOMES
 Frustrated with QoH being a lagging indicator – quantify in
“real” time the success of the hire
 Survey hiring manager about the process and the early
performance of the new hire
 Would you hire this person again?
 Survey the new hire about the process and the culture of the
organization
 Would you accept this position again?
18

19. PREDICTING “SUCCESSFUL”STAFFING
OUTCOMES (CONT.)
 Challenges:
 Will managers and new
hires be “honest”?
 Should HR intervene in
a “At Risk” situation?
 “Survey” fatigue?
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BOTH
PARTIES
SAY
“YES”
BOTH
PARTIES
SAY
“NO”
PARTIES
DISAGREE
GOOD
HIRE
AT RISK
HIRE
BAD
HIRE

20. ASSESSINGTHE SELECTIONTOOL
 Examined the relationship between selection tool results and
new hire performance measures
 Evaluation forms sent to hiring managers between 3-9 months
after hire (dependent on employee segment)
 Compared objective and subjective quality data against the
selection tool results to validate the results and recommend
future strategy
20
Use performance criteria to evaluate selection tool results.

21. ASSESSINGTHE SELECTIONTOOL (CONT.)
 Objective performance
 Subjective Competency
 Leadership
 Managing Execution
 Building Relationships
 GeneratingTalent and
Organization Capability
21
Data Gathered
 Learning and Applying
Personal Experience
 Subjective Quality
 Ability/Job Fit
 Motivation Fit
 Speed to Performance
 General Performance
 Rehire Likelihood

22. THE HIRING BATTINGAVERAGE
 Evaluating manager hiring prowess
 Idea from a JackWelch column
 http://www.welchway.com/Management/People-
Management/Hiring Right/The-Hiring-Batting-Average.aspx
 Every candidate is evaluated by 3 people beyond the hiring
manager
 The evaluators give each candidate a “hire”/ “don’t hire”
recommendation
 Six months later the hiring manager evaluates new hires with a
“exceeds,” “meets” or “below”
22

23. THE HIRING BATTINGAVERAGE (CONT.)
 Example
 Give 10 “hire”
recommendations
 6 are “meeting” or
“exceeding expectations”
 .600 hba
23
Calculate hiring recommendations with performance.
 Benefits
 Identify talented “talent
spotters”
 Empower and engage
current employees
 Improve the on-boarding
process for the new hire

24. WHYAREN’TWE?
 “Quality” is a subjective term – one size rarely fits all
 There is no clear measuring stick (benchmark)
 It takes resources and effort to measure
 The accountability hot potato – if the metric is “bad” – who is
“at fault” – Staffing or Management?
24
So, if we all agree that we should measure QoH, why aren’t
we?

25. QUALITY IS INTHE EYEOFTHE BEHOLDER.
 A “quality” hire is dependent on the role, department, and even
the economy.
 There are a number of factors that if improved can signal a
quality hire
 LongerTenure
 Promotable (Time to Promotion)
 Increase Productivity
 Manager Satisfaction/Assessment
 Additional Credentials
 Compensation/Cost
25

26. WHAT ISYOUR “HIRING PHILOSOPHY”?
 Not only is “quality” dependent on the role/function/ work
team…it is also dependent on organizational hiring
philosophy…
 If your organization has invested in a number of assessment
tools both skill and personality based…then your “quality
expectation” will be higher than an organization that hires for
“culture” such as Zappos or Southwest which expects and
encourages employees to “wash out” early.
26

27. THE BEST BENCHMARK ISAGAINSTYOURSELF.
 Rather than looking for external benchmarks (which will differ
widely) organizations should look
 Across similar business units
 By geography
 Over time (year over year)
 By hiring manager
27

28. CREATEA MEASUREMENT PLAN.
 For each measurement - what is the purpose?
 To investigate (diagnostic)
 Create accountability (scorecard)
 Evaluate performance (scorecard)
 To monitor (dashboard)
 A good measurement can only have one master
 Need a one/two reporting period “grace” period before
instituting accountability/ performance measures
28

29. COMMITMENTTO MEASUREMENT IS NEEDED.
 TO WHAT EXTENT DOES
YOUR ORGANIZATION
HAVE A “WORKFORCE
MEASUREMENT
STRATEGY”?
20%Results: High or Very High Extent
Source: i4cp Talent Management Measurement Survey, May
2010
 Organizations get what
they put into
measurement.
 Dedicate resources
 Buy-in to survey
 Commitment to act
(judiciously)
29

30. WHAT DO HIGH-PERFORMING ORGANIZATIONS
DO?
 Create and communicate a strategic plan
 Secure appropriate buy-in from leadership
 Segment the workforce and concentrate on the problem or
value-added positions
 Dedicated (and highly skilled) resources
 Statistician
 IO psychologist
 Customize measurement criteria by segment
 Align HR function around the measurement plan
30

31. YOUR NEXT STEPS
 What is your organization’s Hiring Philosophy?
 Does your organization have an EmployeeValue Proposition?
 What is your organizations viewpoint on talent identification and
development?
 Who is interested in Quality of Hire?
 Head of HR
 Recruiting Leader
 Senior Leadership Team
 Line Management
 Are employee segments already identified?
 How sophisticated is your human capital data?
 Create and document your Measurement Strategy
31

32. TIPS FOR SUCCESS
 Be clear about why you are investing in measurement
 Diagnosis
 Evaluate
 Create accountability
 Predict
 Determine feasibility for your organization
 Capture a baseline measurement
 Set goals or create hypothesis (what will good look like)?
 Tailor reports to audience need and appetite
32

33. EXAMPLE
2012 2011 2010
Retention of New Hires
Overall Termination Rate 16.6% 15.2% 14.1%
New Hire Termination Rate 24.5% 29.6% 29.0%
Number of new hires 1,617 1,337 1,213
Number of first year terminations 396 395 351
Overall: New Hire Term Ratio 1.48 1.95 2.06
Performance
Performance is assessed by Hiring Manager - 4 months after start date
% of New Hires that Exceed Expectations 15.0% 12.5% 11.5%
% of New Hire that Meet Expectations 74.5% 75.0% 73.5%
% of New Hires that Do Not Meet Expectations 10.5% 12.5% 15.0%
Culture Fit
Culture Fit is assessed by the Employee & Manager through Opinion Survey
% of "Good" Hires 79.5% 78.5% 76.0%
% of "At Risk" Hires 13.0% 15.5% 15.0%
% of "Bad" Hires 7.5% 6.0% 9.0%
Employee Development & Mobility
Working for Organization 75.5% 70.5% 56.5%
Progression Promotion n/a 10.6% 15.9%
Transfer/Promoted n/a 2.7% 7.9%
Consolidated Quality of Hire Report
 This is the cover sheet for a
series of reports that are
produced on an annual basis
 This report requires the
following HRIS data
 Hire Date
 Term Date
 Promotion
 Transfer
 This report uses data
acquired from opinion
surveys
 Hiring Manager
 New Employee
33

34. RECOMMENDED READING
34

35. DEFINING HIGH PERFORMANCE
 These companies performed better over the past five years,
based on these four indicators:
1. Revenue growth
2. Market share
3. Profitability
4. Customer satisfaction
35
i4cp defines high-performance organizations consistently
outperform most of their competitors for extended periods of
time.

36. SOURCES OF POORQUALITY
Cited in: Quality of Hire –The Next Edge in Corporate Performance.Taleo (2004)
36

37. DRIVINGQUALITY
Cited in: Quality of Hire –The Next Edge in Corporate Performance.Taleo (2004)
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