How to Measure Quality of Hire: Key Metrics, Formula, and Improvement Tips

What makes a good hire?

And how can you tell?

These are the questions that keep the recruitment industry worth $700 billion.

Forget “What is the meaning of life?”

What is the meaning of quality of hire?

Essentially, it’s how well a new employee contributes to their company’s success.

Sounds simple. It’s not always.

What makes it difficult is that hiring someone good doesn’t necessarily make it a good hire.

Russell Crowe. One of the best actors out there on his day. Gladiator. Master and Commander. Robin Hood. All epic.

But did that make him a quality hire when he was warbling around in Les Misérables?

Mais non.

So it can be difficult to judge quality of hire. And yet, it’s critical to do so.

A high-quality hire can be up to 8x more productive in very high complexity roles.

This article will show you what to assess, and how, so you can gauge quality and avoid hiring the wrong Javert.

Table of Contents

• Why Measuring Quality of Hire is Important 
• Key Metrics for Measuring Quality of Hire
• Calculating Quality of Hire: Step-by-Step Guide
• Tools and Methods for Assessing Quality of Hire
• Tips for Improving Quality of Hire
• Higher Hire Quality Can Be Yours

Why Measuring Quality of Hire is Important

Obviously, we all want high-quality hires. 

Do we really need to measure quality of hire, though? Is it not a bit “after the horse has bolted”? 

If you hire someone bad, and you realise they’re bad afterwards, it’s too late to do anything about it, surely?

Well, not quite. Look at it this way, for one quality of hire example:

Imagine you have two hires. 

You measure their quality, and it turns out one’s great, and the other’s not.

So you look at the hiring process, from job spec through to offer. 

Were there any differences between them? Was one interview process more thorough?

By analysing and replicating the things from the good hire process, and avoiding the things from the bad hire, you have a better chance of having high-quality hires in future.

And more high-quality hires mean:

• Greater productivity (as we saw earlier). Even low complexity roles can see up to 50% higher productivity.
• Bigger revenue. McKinsey suggests that companies that measure hire performance, and act on it, can see up to 30% higher revenue growth.
• Better retention/lower turnover (and so lower overall recruiting costs). High-quality hires are typically better engaged and more motivated, which can result in greater longevity (though a good culture fit doesn’t negate the need for actively promoting employee engagement as well).

Key Metrics for Measuring Quality of Hire

There are several factors you can consider to determine if a hire is high quality.

And they should be data-driven, rather than vibe-based.

Your quality of hire index will depend on what you do as a business and what exactly you’re looking for from your hires.

Still, as a guideline, here’s what to include on your quality of hire scorecard:

Performance Ratings

This is the simple, overarching metric about how well new hires meet (or beat) expectations relative to their job requirements over a defined period of time – say, 6 months to 5 years.

It’ll likely be composed of KPIs (or productivity metrics – more on that next) that apply to their specific role. You can condense these into an established “performance rating” figure by establishing a review system.

For example, if a new hire exceeds every KPI for their role, that could be a “5” performance rating. If they miss a few, that could drop to, say, a 3. You can weight KPIs on their importance to business success for a more accurate figure.

Productivity Metrics

This differs from overall performance in that it’s more granular, which can help you dig down into what makes a hire good quality.

Track role-specific outputs (like projects delivered, frequency of bugs, or code commits for a software developer) over a set timeframe, and compare them to team averages or pre-hire benchmarks. As with each metric, you can weight and condense these KPIs into a single figure.

Hiring Manager Satisfaction

Self-explanatory. It’s how happy their direct supervisor is with their fit and performance, gathered from surveys, reports, and feedback. The trick is taking this ostensibly subjective metric and making it measurable.

The technique reflects how you should conduct your interviews – as objectively as possible – by standardising the feedback with clear criteria. For example, by rating technical skills, soft skills, and ramp-up speed separately, and using a consistent scoring scale across all hires. 

Retention Rate

This is more of a broad quality of hire indicator for your company or team, rather than assessing the quality of individual hires. It’s also fairly easy to measure – you track the percentage of employees who have remained at the company for defined periods of time (6, 12, 24, 60 months, etc.) since their hire. You can make it even more specific by measuring against role, department, or hire source.

Cultural Fit

At first glance, this may seem subjective and hard to quantify. It’s how well a new hire aligns with nebulous qualities like company values and working style. However, you can still turn it into hard data. Similar to satisfaction, use structured surveys from colleagues and the employees themselves. The questions should glean insight into observable behaviours that indicate alignment with a culture fit. Say one of your cultural values is that you’re collaborative. You can ask about times the employee has shared work, and look for evidence.

Calculating Quality of Hire: Step-by-Step Guide

How do you calculate quality of hire? Is there a special quality-of-hire formula you can use?

Again, annoyingly, it’ll vary. Google it – there’s plenty of calculations out there, and no one-size-fits-all solution. Nor should there be; there’s far too many variables.

But here’s a framework we like, using what we’ve talked about so far, that you can take and/or adapt to use as you see fit:

Quality of Hire Score = (Performance + Retention + Cultural Fit + Satisfaction) / 4

Here’s how it works:

1. Analyse an employee’s performance rating based on whatever KPIs best prove how well they’re achieving their goals. Weight each of these so you can boil the rating down to a single number (in this case, 0-5, five being the highest).
2. Repeat this step for each of the other metrics (in this case, retention, cultural fit, and manager satisfaction). Ensure that you’re satisfied that a 5/5 for each of these metrics is equally representative of quality of hire. For instance, is someone having been at your company for a long time “worth” the same as flawless performance? If not, you may choose to cap your ratings at a certain level, or you might alter your calculation slightly.
3. Add each of the metrics scores together, and divide by the number of metrics, to get your overall Quality of Hire score.
   

So, for example…

Since Carl joined Virtual Fleet, his Performance, based on his deliverables metrics, has been spotty at best. You aggregate his KPIs and it gives him an overall score of 2.8/5. 

However, he has been here for 8 years – as long as anybody. That gives him a 5/5 for Retention (In this case, retention is just as important a metric for quality of hire as performance). 

His Culture Fit surveys show he doesn’t always live up to company values. Virtual Fleet believes in transparency, and there’s evidence he’s a subdolous character, so they’ve only granted him a 2.4/5.

But as far as Manager Satisfaction goes, he’s doing quite well. Despite his sneaky ways and failure to meet deadlines, which negatively impact his culture and performance scores, he always finds a way to get things done. So he’s got a 4.2/5 here.

So Carl’s Quality of Hire score would be:

2.8 (Performance) 

+ 5 (Retention) 

+ 2.4 (Culture Fit) 

+ 4.2 (Manager Satisfaction) 

= 14.4

/ 4 (the number of different metrics) 

= 3.6

Quality of Hire = 3.6/5

Once you’ve completed a few calculations, you can set benchmarks to determine what constitutes a “good” score, and therefore a high-quality hire. You can align these benchmarks against what you want to achieve as a business in a recruitment sense, and compare your scores to industry standards.

Bear in mind, these scores can and will fluctuate over time (especially retention). Be sure to monitor quality over time, and use it as an opportunity to try to improve scores between measurements.

Tools and Methods for Assessing Quality of Hire

No-one’s expecting you to do all this by hand.

There are Applicant Tracking Systems (ATS) that can manage and centralise much of this process for you, as well as other performance management and HR systems. Greenhouse, Lever, and BambooHR, for example, all offer some form of quality of hire tracking. In fact, some of the more AI-focused ones use predictive analytics to gauge the quality of hire before a candidate has even started.

We mentioned metrics like cultural fit can be subjective and prone to bias. Tools like the Predictive Index behavioural assessment (among others) use psychometric questions and surveys. They’re not perfect, but they can at least standardise the measurements.

Of course, all this takes time, and effort, and could be costly. There is a shortcut. Use a third-party recruiter, like Remote Crew, with a pool of candidates who’ve been pre-qualified across metrics that determine hire quality, like personality and skills.

Tips for Improving Quality of Hire

The idea with measuring quality of hire is you don’t just look at your scores and say, “Oh. I guess that’s what it is”.

You’re trying to improve your quality of hire, constantly.

Here’s ways you can pump those numbers up.

• Refine the Interview/Assessment Process: Prevention vs. cure and all that – the best way to ensure you have quality team members is to hire high-quality individuals (by your standards). You do that by keeping your interview and assessment processes tight and structured – check the metrics if you’re unsure whether they are or not. We mentioned post-hire psychometric testing – there’s nothing stopping you adding this before you offer as well. Technical skills testing also provides evidence they can perform on the job, which should be one of your metrics.
• Enhance Onboarding Programs: Better onboarding means better retention, which, again, should be a quality of hire metric. If you give new hires a clear understanding of the expectations and targets of the role, it’ll be easier for them to perform well, thereby increasing quality of hire. Good onboarding also exposes new starters to the company culture early on, which can help with assimilation.
• Feedback Mechanisms: Quality of hire measurement shouldn’t be some behind-the-curtains secret. Let new hires know the metrics, and keep them informed of how they’re performing against them, providing aid where needed. These feedback loops shouldn’t just be one way – you should ask team members what they feel’s working and what’s a hindrance. Keep these sessions regular, via a channel that suits your team, and log the results somewhere central and visible.
• Continuous Improvement: As well as constantly trying to improve your quality of hire, you should also be on the lookout for ways to improve how you improve it. Use the insights you get from measuring your quality of hire to see which methods are working and which aren’t. With how quickly things can change in business, improving quality of hire is, by necessity, an ongoing, ever-changing process. 
  

Higher Hire Quality Can Be Yours

Quality of hire needn’t be a mystical, ethereal quantity you must passively accept.

You can measure it. And if you can measure it, you can do something about it.

With the right tools, knowledge, and mindset, you can improve your quality of hire and reap the rewards that come with it.

Want to discuss how you can tailor things to improve your quality of hire, specifically? Get in touch.

Best of luck!