Why Candidate Quality Matters So Much?
David Earle

Quality is the most important core staffing metric because it has the greatest impact on the performance of the enterprise. The proven downstream financial impact of poor candidate quality in terms of job performance and high turnover dwarf the financial impact of any increase or decrease in direct hiring costs as measured by CPH.

• Cost per hire is typically only 8-12% of first year compensation.
• The cost of poor retention (high turnover) is typically around 50% of that compensation and can easily top 100%.
• Poor performance is a multiple of compensation over the entire employee lifecycle.

Quality is both a specifications and a performance issue:

Specifications answers the question, “Did we hire the appropriate person?”
Performance answers the question, “Did that person actually perform well in his/her job?"

Despite its importance, quality of hire has been neglected historically. Our studies say that fewer than half of all companies even routinely measure new hire qualifications against job specifications. Where it is done at all, companies may only gauge it occasionally and informally in conversations between recruiters and hiring managers; or they may just define specifications, or just performance.

Yet quality is one of the keys to strategic business relevance. The ability to competently measure and control workforce quality is the closest thing to a guaranteed ticket to the C-suite.

SETTING UP A QUALITY PROGRAM

There are five ways to measure hiring quality:


• Candidate qualifications

• Hiring manager surveys
• 
Performance reviews

• Productivity measurements
• Turnover

Pre-Hire

Candidate Qualifications

Quality begins by assessing whether we are hiring the people we set out to hire. This assessment is both specific – Are these the people with the qualifications the hiring managers are asking for?; and general – Are these the types of people who can work productively in our company? We need both answers to have an effective program.

Checklist (or Scorecard) #1 includes education, track record, special skills (C++ programming), and special abilities (conversational French). Good job descriptions and good resume matching should provide this match.

Checklist #2 is a broader, subtler, suitability measurement of personality, leadership and project management skills, and problem solving ability. These are defined through pre-employment assessments such as tests, reference checks, and interviews. This checklist must mesh with checklist #1 and be determined collaboratively by both the hiring manager and the recruiter.

Checklist #3 is a performance evaluation checklist. How and when will the hire be evaluated based on job performance? What competencies must be demonstrated? How will these be graded?

The greater the match with checklists 1 and 2, the higher the “specifications” quality of the candidate. The ratio of A-level candidates (those who meet all criteria) to B, C, D, and E candidates should ideally be categorized by both source (job board, job fair, university recruiting) and by individual recruiter (in-house, contingent, external) to reveal where the most high quality candidates are coming from and where to spend your marketing dollars.

Notes on preparing checklists:

1. You need all three. Otherwise you won’t be able to flag things like the brilliant person with great skills whose motivation, EQ or ability to execute is lacking; or the departments where poor managers turn perfectly good candidates into poor workers.
2. Be detailed and specific, not general and generic. The typical job description, for example, makes a poor scorecard.
3. The pre-hire and post-hire checklists must match. You need to be comparing apples with apples not with artichokes.

There are dozens of assessment programs you can adapt to specific situations. Here is a simplified sample, with ten categories ranked on a scale of 1 (terrible) to 5 (superb), with abbreviated inserts.

Post-Hire

These are general guidelines. The specific timing will vary by company and by job classification. The shorter duration reviews are especially important because most new hires make their initial loyalty decisions quite quickly, within the first few months.

• Initial assessment (1-3 months) - Completed by both the candidate and the hiring manager to make sure orientation and training have provided the tools to perform. Can probably confirm job-specific technical and special skills.    
• First performance assessment (6 months) - For some jobs a 6-month assessment may not be informative because the learning curve is too long. But even for these jobs, a progress review is appropriate. By this time cultural fit should be apparent.
• Second performance assessment (12 months) - Individually, this is the “ultimate” recruiting measurement to determine whether or not recruiting is locating and placing high quality candidates. This is a good time to measure retention as well. Poor retention is expensive, representing a corporate bottom line cost equal to the sum of each departing worker’s hiring cost, training cost, and performance cost, plus similar costs for their replacement, not to mention interim lost productivity cost. Beyond a year, staffing excellence fades as a significant factor in turnover.

The Bottom Line

Setting up a quality measurement from scratch takes considerable commitment. Senior management commitment is crucial to deal with political and financial issues. Don’t attempt to measure everyone. Start small with a target group that has particular importance; say, a critical function in the company (like engineering) or a critical subgroup (like management trainees). Develop your checklists, processes and working relationships. Smooth out the bumps and refine your measurements. Walk before you run.

Candidate quality is a rising concern in staffing circles. Respondents to our audience survey last December called it their top focus for 2010 (up from #3 last year.) Perhaps this merely anticipates increased marketplace competition for talent. Perhaps it also reflects the increased demands on staffing for business accountability, as well as increased executive recognition that talent management is a critical component of corporate strategy. We hope it’s all the above.

Next week, we’ll take this general quality framework and show you how to make it even more powerful by converting your evaluations into dollar impacts on your enterprise’s bottom line.

Related Reading

Quality of Hire: The Missing Link in Calculating ROI

Candidate Quality Can Be Defined

How to Measure Candidate Quality