Metrics That Matter

The following originally appeared in Recruiting Trends on June 24, 2016 and features comments from OperationsInc CEO David Lewis. To view the original article, please click here

by Carol Patton

reclogoErin Peterson is “consistently shocked” at how few organizations actually measure the quality of hires. As vice president of talent management at NFP, an insurance broker and consultant in Austin, Texas, with 3,600 employees at 150 offices nationwide, she believes many HR professionals do not know what to measure or how to define quality of hire. She also thinks many falsely believe that sophisticated technology or processes are needed.

HR at NFP has been measuring the quality of its hires since 2015, when it developed basic processes that measure multiple areas, including which recruitment sources offer the best job candidates.

“I want people internally talking about how great HR is to work with [and] what great hires they got going through our corporate process,” says Peterson.

For many HR professionals, measuring the quality of hires is a nebulous task that makes the process overwhelming, even brutal. While it helps HR assess the quality of its recruitment program, it may also reveal trouble spots within an organization — such as specific onboarding practices — that can reduce a company’s ability to accomplish its goals. Some HR professionals are exploring creative ways to tackle this rich data, better analyze and understand it, and then link it to company successes or failures. It’s not easy, many say, but the data is out there, waiting to be captured and translated into HR insight and intelligence.

Besides measuring six-month attrition rates of new hires—striving for 95 percent to stay for at least six months—NFP’s HR also gathers opinions about the recruitment process and quality of hire from hiring managers it surveys, Peterson says.

For example, hiring managers rate the performance of new employees using a three-point satisfaction scale, say if they would use the in-house recruiting services again and tell what recruiters must focus on with future hires. Then recruiters step back and assess what they learned.

Sometimes, though, a poor hire may be the result of an inadequate onboarding program or inexperienced manager. For those outlying issues, Peterson says, HR is piloting simple technology from SurveyMonkey, a cloud-based survey development company, to poll new hires within their first 90 days on the job. They are asked to share their feelings about the organization, onboarding, the recruitment process, if their boss is setting them up for success, if they’ve identified career goals and objectives and how their job success will look like six months from now.

Similar surveys are also emailed to individuals who turned down a job offer. “We want to know what they thought of our process,” Peterson says, noting that the return rate is roughly 30 percent. “You’ll get rich data from them [about] their interaction with our recruiters and the net promoter score — if they would recommend the recruitment process to friends and family.”

HR also needs to connect the dots between onboarding and new-hire success, she says. Maybe those who completed 70 percent of an online onboarding program are more successful at their jobs than those who completed 20 percent. Peterson believes that “great onboarding” starts before the person’s first day on the job. New hires can complete paperwork in advance and receive a personal welcome from HR or their new boss, both of whom can also address expectations and valuable in-house resources that can help them succeed in their job.

Typically, one metric that’s overlooked is the source of hire.

“When you know if someone worked out or not, you always want to tie that back to the source,” Peterson says. “If you can make a correlation between a source who’s giving you the highest-quality, best-performing employees, of course you want to over-invest in that particular source.”

Meanwhile, measuring quality of hires is everyone’s job, not just HR’s, she says, and sharing this data is common in mature organizations. HR must go public with its metrics and invite discussion among hiring managers on how to strengthen the recruitment as well as the onboarding process before the next employee is hired.

“Pick something or take several things and decide for a year that’s what you’re going to measure,” says Peterson, adding that such feedback is a gift. “Change it the next year if it’s not working. But to not measure because it’s hard to measure is not an excuse.”

Catch the Wave

Hopeful Job Market - 1.28.14Stefan Gaertner, a Los Angeles-based principal at global HR consulting firm Mercer, recently worked with a pharma-biotech company that employed more than 10,000 employees. While in growth mode, it hired people left and right but hadn’t established a process for measuring their quality.

Without naming the company, Gaertner shares how he led the organization through a quality-of-hire measuring process. Among the first steps was developing a standard of comparison.

“You must first determine what you’re measuring against,” he says. “We compared people who got hired with those who got promoted.”

Promoted employees, he says, serve as an effective comparison group. Because they demonstrate success, they’re perceived as quality employees.

Factors such as employee turnover — voluntary and involuntary — along with hiring costs, performance history, promotions, pay increases as well as recruiters linked to successful hires were all then compared between the two groups. During their first three years on the job, he says, new hires were more likely to receive low performance ratings and either quit or get fired. But after three years, the difference in performance between new hires and promoted employees starts to disappear.

Surprisingly, Gaertner says, the analytics revealed that certain positions would have been better filled internally, through promotions, rather than externally. After adding up the high cost of employee turnover, staffing-agency fees and new-hire training, he says, the company realized that, by reducing external hiring, it could have saved roughly $40 million.

Although HR analytics have been around for many years, Gaertner compares them to a wave that has been gaining speed and growing in size every year. He says HR must become more strategic, and understand how to use and apply metrics, or “be swept away.”

Among the most common HR excuses for not measuring quality of hires is that the pressure of time to fill unstaffed positions overshadows the need to find the right person, says Paul Rubenstein, partner and leader of talent-strategy leadership and assessment at New York-based HR consultancy Aon Hewitt.

“What [leaders are] asking for is a return receipt,” he says. “There’s nothing worse than hiring somebody and not protecting your investment by making sure you’re doing all the [right] things to socialize them, bring them into the environment, make sure that they are meeting the right people. … Don’t shortcut your own system.”

But that’s what many HR professionals have been doing, he says. Instead, Rubenstein recommends they disseminate employee surveys to collect three different types of data: absolute data, whereby hiring managers disclose whether new hires are applying skills or knowledge demanded by their new job; peer data, whereby co-workers reveal if the person is a team player or fits into the company’s culture; and productivity data, or hard numbers, such as sales quotas or customer-satisfaction ratings.

Full Circle

Although just 4 years old, Flatiron Health, a healthcare-technology company with offices in New York and San Francisco, has been measuring a wide variety of metrics to determine the quality of its hires and improve its hiring practices.

Recently, its engagement survey revealed that 90 percent of its 275 employees — roughly half were hired last year — believe the company “is a great place to work,” says Hillary Mager, director of recruitment.

“It means that we are hiring people who like it here and share our values and that we should continue testing people in the [same] way in our hiring process,” she says.

Flatiron’s HR department has also defined quality of hires as individuals who share and demonstrate the company’s more nontraditional values, such as solving problems that matter and showing poise under pressure. “This is who we’re looking for, people who show these [values],” Mager says.

In addition to conducting 360 surveys and semi-annual performance reviews, HR also measures employee turnover (now 0.8 percent) and team productivity. Part of this process includes developing objectives and key results, or OKRs (a measurement process introduced by Google), which are high-level objectives the company hopes to achieve within six months, along with measurable key results. A good example of a recruitment OKR is filling 20 percent of priority jobs.

But what’s really worth noting is the company’s performance-review committee, which includes Mager and several others from different departments. After performance reviews are completed, she says, the committee identifies quality-of-hire patterns related to employee skills, values and abilities.

“We went through this process for the first time this year and reviewed [employees] for values,” she says, noting that the committee identified the types of values demonstrated by new hires and compared them against high performers. “We have pretty clear indicators on what the patterns [and gaps] are … . The next step is to focus on [employee] abilities.”

By engaging in this process this year, the committee accomplished several tasks. It further defined quality of hires using specific values and, soon, abilities as measurement tools. Likewise, recruiters now have a better understanding of what constitutes a high performer or quality of hire and can focus on recruiting candidates with those characteristics. It’s important, Mager says, to bring the data full circle, back to where it started — at the recruitment process.

A Clear Picture

Other HR professionals conduct post-hire interviews within 120 days of an individual’s start date, says David Lewis, president and CEO at Operations Inc., an HR outsourcing and consulting practice based in Norwalk, Conn.

Whenever possible, these interviews should be face-to-face and should separate fact from fiction. HR should walk away with key information, such as whether the new hire’s job expectations match the recruiter’s job description, if training adequately met their needs, or if the pace of their career growth is exactly as promised. Lewis says discrepancies can reveal disconnects during the recruitment process, which may lead to employee dissatisfaction, low job performance or terminations.

Tracking the progression of those individuals is also an important and relatively easy but rarely executed task, he says. With help from an HRIS system, human resource practitioners can create a list of new hires over recent years to compare their job titles and levels, departments they worked in and other metrics. If recruiters focused on hiring high potentials, for example, how many individuals were promoted? If turnover among high potentials is high, did recruiters oversell internal career opportunities?

The longer period of time that can be evaluated, the better, because it provides a clearer picture of the individual and in-house practices. Lewis says tracking can provide approximately 80 percent of the information HR needs about quality of hires.

Still, HR directors need to go one step further by sharing this data with hiring managers. Together, he says, they can address the number of positions that were opened and filled; employees who transferred to different departments, quit or were terminated; and associated costs. Then they can share their perspectives as to what went right and what went wrong.

Ultimately, if HR can convert this data into dollars and cents, Lewis says, “you’re leaps ahead of everybody else.”