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And now, on with the show…
In today’s edition:
- How may I help you today?
- Chart of The Week: No job? No problem.
- How Do You Calculate Quality of Hire?
- This week’s comic: Onboarding Blues
- Thank you Sponsors
How may I help you today?
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And just in case you’re thinking, “Jim, I don’t want to click anything, just tell me what you do.” I can respect that. In a nutshell, I generate demand for HR tech companies with awesome content. The type of content I produce includes, but is not limited to, the following:
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No job? No problem.
There are a lot of layoffs going on these days, especially in tech. No news there. However, what is noteworthy, is the rate of new businesses being formed. To quote YCharts…
Monthly US Business Applications surged at the onset of COVID-19, reaching a peak of more than double its long-term average in July 2020. At the end of 2021, Josh Brown, co-founder and CEO of Ritholtz Wealth Management, joined YCharts to discuss the defining charts of that year, and observed “an explosion in people registering new companies.”
That explosion has persisted. New businesses are being created at a rate well above average seen before the pandemic. When comparing the increase in new business applications to the surge in US Quits, it’s quite possible many of these newly-minted proprietors were formerly employed—and are no longer looking for a job.
If there is a sunny side to the present-day labor market chaos, I think this is it
And if starting a biz in the middle of a recession sounds ludicrous to you (and yes, I know we are not officially in a recession), others have done it to great success. Among them: Netflix, Uber, Airbnb, Microsoft, Burger King, Disney and FedEx.
This week’s newsletter is brought to you by ClickUp.
How Do You Calculate Quality of Hire?
So somebody sent me this, I don’t remember who, but it was a press release citing survey data from AMS. (I love me some good data.) To quote…
AMS Verified allows members to search for and receive deep product analysis of over 160 of the world’s leading talent technology solutions. Anonymized data from these searches has demonstrated the topics most on the minds of over 150 talent acquisition professionals.
Launched just six months ago, AMS Verified’s most recent data analysis shows:
- 72% of members searched for technology to reduce the time to hire
- 66% of members selected the objective to increase the quality of hire
- 50% of members selected the objective to increase candidate satisfaction
What stood out to me was the 66% stat about quality of hire (QOH) because QOH has been a hot topic for a while. In fact, I remember back in 2016, a LinkedIn survey proved that leaders lacked confidence in how they measured quality of hire. Only 33% of respondents felt that their methodologies were strong, and an even smaller 5% felt “best in class.” All suggesting that there is a lot of opportunity for improvement. And that had me thinking, what are some ways that companies can better measure the effectiveness of their hiring practices?
Fast forward a year and QOH is the topic of a Society of HR Management (SHRM)’s 2017 Talent Acquisition Benchmarking Report. It pointed out multiple HR measures for gauging the quality of hires. They also noted the trend that “…the use of 360-degree feedback scores has risen from 18% in 2015 to 28% in 2016. The overall percentage of organizations measuring quality of hire has risen from 19% in 2015 to 23% in 2016.”
How does Google measure QOH?
As I reflected on that, it struck me how everyone wants to figure out how to calculate QOH but there is no industry standard. For instance, Google suggests figuring out what indicators you want to use, divide them by the number of indicators then, multiply that by 100 to get your quality of hire score.
Google gave this as an example of the formula in action.
Employee A is a salesperson at a small marketing agency. HR decides to evaluate the quality of hire for salespeople based on sales goals, 360 reviews, and hiring-manager satisfaction scores. In the first year, Employee A meets 100% of her sales targets. Her 360 reviews are very positive, showing a 92% satisfaction rate among her peers. Her hiring manager reports that he is very happy with her performance; he rates her 95/100. Quality of hire score: 95.7%
How does Indeed track QOH?
Indeed.com has a different formulation for computing quality hires. After determining the relevant indicators, they add them together, then divide them by the total number of indicators. Here is a sample count.
(Productivity + Client feedback + Training time + Engagement) / Total number of indicators = QOH
By adding scores to each indicator that maxes out at 100, you could rate an employee this way:
93 (productivity score) + 87 (client feedback rating) + 65 (training time) + 76 (engagement) / 4 = 80.25 quality of hire score
How does ChatGPT track QOH?
I prompted ChatGPT with this, “Give me a formula for calculating quality of hire.” It responded with this…
There isn’t a universally accepted formula for calculating the quality of hire, as it can depend on various factors and perspectives. However, here’s one possible formula that you can use as a starting point:
Quality of Hire = (Productivity + Performance + Retention + Cultural Fit) / 4
- Productivity: measures how quickly the new hire can become productive and contribute to the company’s goals. This can be measured by the amount of work completed or revenue generated within a certain time frame, for example.
- Performance: measures how well the new hire performs their job duties and meets or exceeds expectations. This can be measured by performance reviews, feedback from supervisors, or objective metrics such as sales numbers or customer satisfaction ratings.
- Retention: measures how long the new hire stays with the company and whether they continue to perform at a high level. This can be measured by calculating the retention rate of new hires over a certain period of time or by looking at their tenure with the company.
- Cultural Fit: measures how well the new hire fits with the company’s culture and values. This can be assessed through interviews, personality assessments, or cultural fit surveys.
I thought that was an interesting viewpoint but I wanted more options. So, I followed up with “Give me 3 other formulas for tracking qoh” and I had more food for thought.
QoH = Revenue Generated by New Hires – Cost of Turnover
Cost of Turnover = (Separation Costs + Replacement Costs + Training Costs + Lost Productivity) / Total Number of Employees
QoH = (Hiring Manager Satisfaction Score / Total Number of Hires) x 100
Hiring Manager Satisfaction can be assessed through surveys or feedback forms that ask managers to rate the quality of new hires on various criteria such as skills, performance, and cultural fit.
QoH = (Candidate Satisfaction Score / Total Number of Hires) x 100
Candidate Satisfaction can be assessed through surveys or feedback forms that ask candidates to rate their overall experience during the hiring process, including the communication, interview process, and job offer.
How would I track QOH?
After reviewing these formulas, I wondered if there were any others to consider and ChatGPT produced more. At this point, I wondered if I could come up with a formula that was easier to produce. I came up with the following. Set benchmarks to be met on a quarterly basis then grade the new hire’s performance on a scale of 1-100 each quarter. By the end of the year, divide the scores by the number of quarters served for an overall average. Make sense? This is how that looks as a formal computation.
- 1st Quarter – 90% of goals met
- 2nd Quarter – 87% of goals met
- 3rd Quarter – 100% of goals met
- 4th Quarter – 92% of goals met
Overall quality of hire score: 92.25%, giving me the confidence to believe that they will complete 92.5% of all work assigned to them. I would say that’s pretty high quality. But, what do you think? Is that too simple? Is it better to use one of the formulas I cited above? How do you calculate QOH? Let me know by replying to this email. Please and thank you.
Onboarding Blues
Big thank you to Jennifer Rahim for being a good sport! (In case you didn’t know, she won our contest a few weeks back.) And for the record, this comic is satire. Jennifer is a very hard and loyal worker.
How did I do? Click here and rate this comic. Thank you in advance!
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Until next time, see you in the funny papers.
Jim Stroud
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