Even Jack Welch recommends that you use a quality of hire metric
By Dr. John Sullivan
I am an unabashed follower of the HR philosophy of Jack Welch, former CEO of GE. He is a proponent of a “business-like” approach to HR that emphasizes its critical role in impacting organizational results. Welch is certainly controversial in HR circles because he advocates many things that “softies” in HR regale against, including differentiation in treatment, honest and direct performance appraisals, stretch assignments, and yes, routine firing of individuals who don’t produce or fit the system.
His latest foray into HR deals with measuring your “hiring batting average.” By advocating the direct measurement of hiring quality, he adds even more credibility to counter the “silly” list of arguments that many in recruiting make against measuring quality of hire.
His support of using a quality of hire measurement is not unique among CEOs. In fact, Nick Burkholder, founder of Staffing.org, notes how “CEOs are interested in all performance metrics, but especially new hire quality!”
Lame Excuses for Not Measuring Quality of Hire
There is literally nothing more important in recruiting than measuring the “on-the-job performance” (quality of hire) of the individuals you bring into your organization. Many directors of recruiting try to avoid this measurement by shifting the focus to less political, simpler measures like cost, time to fill, or volume.
In this light, some argue that they “filled every position,” but then again, so did the Titanic. They argue that they hired people at a significant cost savings, a claim almost as insightful as “I got this Rolex for only $25.”
There are literally dozens of performance phrases that are uttered by recruiting leaders, but few sound like “We produced 112% of planned hires whose combined performance to date exceeds that of planned hires last year by 43%. Hires were accomplished leveraging an investment just 3% greater than last year’s, with no gains in recruiting headcount. Manager satisfaction with new hires this term is up 27% to a 4.1 on a 5.0 scale.”
When asked why quality of hire isn’t routinely measured, I hear dozens of excuses that typically fall into four basic categories:
1.It can’t be done or it’s too hard. This argument is a direct reflection on the skills of the individual making that statement because a number of organizations already measure the quality of hire on a routine basis, proving that it is possible.
2.It’s not necessary. Because many organizations measure the volume of hires, the cost per hire, and the time to fill, they argue fruitlessly that a quality measure is not necessary. Saying the performance of something you produce doesn’t matter would be ludicrous to a CFO, a CIO, the head of your supply chain, or anyone who goes through a long process for selecting equipment, services, and software.
3.It’s too time-consuming and distracting. A bad new hire will negatively impact the organization, its customers, and the team that they work alongside long after the “cost” of their hiring is forgotten. Yes, measuring anything does take time and resources, but if you are going to skip on a measurement, skip on measuring the speed, the number of hires, or even the cost, but never the performance. If you were about to go in for brain surgery, would you argue that the quality of the surgeon and the success rate of the process wasn’t really very important compared to the cost or the speed of the operation?
4.Manager’s own selection. This is an argument designed to throw accountability efforts off track. Yes, obviously the hiring and retaining of individual hires is directly impacted by individual managers, but that’s not the issue here. What we are measuring and improving is the recruiting and hiring process itself. Every other major business function that is involved in the selection of resources also “shares” some level of responsibility with managers in making selection decisions, but the accountability for making the overall selection process work across many managers always lies with the business unit that designs and maintains the selection process. Because the recruiting function designs and maintains the sourcing and selection process, it alone is responsible for ensuring the process routinely sources and selects individuals who meet or exceed “on-the-job” performance standards.
What is a Hiring Battering Average?
Jack and Suzy Welch, in their August 20 BusinessWeek column, argue that managers and individuals involved in the hiring process should be held accountable for their hiring recommendations. The process they recommend involves simply comparing an individual’s “hire” or “not hire” recommendations with the new hire’s actual on-the-job performance rating after six months.
The performance of the new hire is measured simply on whether the new hire’s “on the job performance” was rated as below expectations, meeting expectations, or exceeding expectations.
A numerical batting average score of between .001 and .999 is assigned to each person involved in making hiring recommendations and a .800 average means that 80% of those recommended met or exceeded expectations. Consider weighting hires who exceed expectations. This hiring batting average is simple, quantifiable, and it ensures some level of accountability.
A More Sophisticated Measure
If you are taking a broader perspective and are looking at the entire hiring process throughout your organization, consider adding other “pre-hire” factors like identifying which source, which assessment process, which selling points, and which individuals had the most impact on hiring individuals who became top producers on the job.
Add other measures of post-hire success beyond a manager’s subjective assessment of the new hire’s on-the-job performance. If an individual must be terminated or if they voluntarily quit within the first year, they cannot be considered a “quality” hire.
On the positive side, consider an increase in diversity hiring into your professional and managerial positions as an important indication that you have a high-quality hiring process.
At the end of each recruiting period, recruiting management needs to determine whether their organization’s hiring process has produced better results than last period’s or the efforts of a previous year. Before you can make an accurate comparison, you must first make a list of all of the possible new hire outcomes.
Actual Output Measures:
- New hire output has increased. Output measures might include productivity, output volume, sales volume, efficiency, etc.
- Time to productivity is quicker. New hires require a shorter number of days to reach the (pre-set) minimal acceptable level of on-the-job performance.Assessments by Managers and Employees:
- New hire performance appraisal scores are higher (for similar jobs).
- New hire scores on manager determined “forced ranking” processes are higher.
- New hire performance management or disciplinary action needs decrease.
- Involuntary turnover of new hires decrease.
- New hire 360-degree feedback scores are higher (from coworkers and/or their manager).
Pay, Rewards, and Recognition:
- New hires receive a greater average bonus compared to a previous period.
- New hires receive a higher percentage of salary increases, as a percentage of salary (when salary is related to performance).
- New hires receive a higher percentage of stock options or stock grants.
- The number of months until new hires are promoted decreases.
- The number of internal company performance awards, recognitions, or nominations increases.
Qualitative Measures of Performance:
- Customer service scores or ratings are higher.
- Error rates, complaint rates, or reject rates are lower.
Indications of Innovation:
- A higher number of patent applications and approvals.
- They produce significant innovations or innovative ideas.
- They produce significant innovations or innovative ideas.
Indications of Leadership and Team Players:
- They are selected as a team lead.
- They are added to the succession plan.
- They are designated as a “backfill” for a team lead or mission-critical position.
- They are rated as having management or leadership potential.
- They help to successfully refer and recruit other top performers.
Softer Indications of Performance:
- They have a higher level of performance in certification courses, training programs, or post-hire assessment tests.
- They require less maintenance, coaching, and management time than the average hire.
The creator or owner of any business process is responsible for measuring the quality and the performance of that process. Just as CIOs measure the performance of software and hardware they select, and directors of marketing measure the performance of PR and marketing plans, directors of recruiting must quantify and measure the performance of their selection process.Whether you choose a relatively simple approach like Jack Welch’s “hiring batting average” or choose to institute a more sophisticated approach, the key is to do something right away and then refine the approach over time.Even though “efficiency metrics” like volume, speed, and cost have some value, process “effectiveness metrics” (i.e., measuring the impact of the hiring process on business results) is the one and only measure that sends a clear message to senior management that recruiting is strategic and businesslike.Now, if you want to do something that is hard to do, sit with your CFO and convert the results of superior recruiting into its dollar impact on corporate revenue. But that’s another article.
Dr. John Sullivan (JohnS@sfsu.edu) is a well-known thought leader in HR. He is a frequent speaker and advisor to Fortune 500 and Silicon Valley firms. Formerly the chief talent officer for Agilent Technologies (the 43,000-employee HP spin-off), he is now a professor of management at San Francisco State University. He was called the “Michael Jordan of Hiring” by Fast Company magazine.