Staffing Focus on Quality of Hire, but How to Measure it?

The corporate staffing department performs a critical gateway function in a company, bringing people from the outside world into the organization and facilitating the internal movement of existing employees. As such, staffing has a huge impact on the quality of the workforce. Attracting a quality workforce and deploying it optimally are fundamental goals of every organization. The quality of employee performance begins at the point of hire or deployment.

 

Many executives intuitively understand the powerful impact that employee quality has on corporate performance, however a gap exists between that realization and the execution of programs directed at an organization’s largest expense: its workforce. We believe companies that define consistent processes and metrics around quality of hire and quality of the workforce will benefit from a sharp competitive edge in the future.

 

As a business process, staffing departments have made great strides in process optimization. For many corporations, both hiring cycle times and costs associated with hiring have been reduced. Speed of hiring and cost containment are important and measurable drivers in the staffing process. However, combined with quality of hire, speed and cost form a “virtuous triangle” – each affecting and being affected by the other. Yet each point is not equally weighted. In contrast, quality of hire presents a more nebulous metric to define and measure, but is the critical measure to take into account. Ultimately, quality of hire has the potential for the greatest impact on the organization.

 

 

To improve the quality of an overall staffing process, each step of the process must be designed to maximize the probability that the candidate ultimately selected meets the expectations of the hiring manager. Quality has to be achieved not as an accident, but as a matter of design.

 

The steps in which to address quality are:

1. Job success analysis

2. Targeted sourcing

3. Fast reaction time

4. Consistent screening process

5. Measuring quality of hire

6. Continuous improvement

 

Financially, the impact of talent on corporate performance is increasingly acknowledged. Consequently quality of hire metrics should be more widespread, yet detailed data on quality of hire measurement practices is scant. Companies use different measurements and goals for initiatives to evaluate quality of hire that also may vary department by department.

 

The ultimate best practice for staffing to improve the quality of hire is to use quality of hire data to optimize the staffing process. One way is to evaluate and measure the return of the assembled workforce and determine how to garner a better return on staffing processes overall. Taleo has developed proprietary models on Return on Workforce™ and how it relates to quality of hire.

 

Return on Workforce is the ratio of outcome – measured in operating income – to input, measured as the total labor cost (full time and contingent). For corporate management and shareholders it is a new and relevant metric to benchmark as it shows the return from all labor costs and the level of corporate efficiency.

 

Operating income

ROW = ---------------

Labor costs

 

Taleo advises executives to move away from revenue per employee and instead use the ROW ratio to establish their effectiveness in operations and benchmark themselves. Revenue per employee does not take into account the composition of the corporate workforce, especially the significant use of contingent workers. The ROW ratio brings a better depiction of today’s workforce reality and consequently translates into better financial performance for the organization using it.

 

Corporations need to measure quality of hire, which amounts to determining how a new hire’s abilities and performance varies from pre-hire requirements and expectations. The assembled workforce of a corporation is its predominant competitive asset.

 

Taleo has been advising organizations on the design of staff mobility programs and their financial impact to help ensure talent remains a competitive asset. This new metric, ROW, should give more visibility to a key area of management attention: the workforce. Previously, workforce management had no meaningful ratio for executives. Return on Workforce should provide more science in a practice that has been mainly an art.