- Everyone knows that in business, “you can’t manage what you can’t measure,” or, “what is measured is what you get,” because key measurements are what people are held accountable for. Companies say, “Our most important asset is our people,” but most don’t measure hiring/promoting success. If they did, goals to measure success hiring and promoting would be set for managers of companies each year. According to our research, if these goals were set and measurements had been collected, the results for the last 4 decades would be very disappointing. If these results had been tracked, best practices would have been investigated (such as Topgrading), and managers would have been held accountable for the less-thandesirable hiring/promoting results.
- It’s necessary for accountability: Topgraders shine and non-Topgraders don’t. Topgrading should be added to every manager’s Job Scorecard, including the CEO’s. When results are fed back to managers, peer pressure is intense for non-Topgraders to embrace the methods. (“Hey, VP Sales, 75% of the sales reps you hire fail and if you don’t do a lot better in sales, none of us will get a bonus!”).
- It provides an opportunity for senior management to reinforce the commitment to Topgrading. Outstanding Topgraders are not only praised, but are typically so successful they get more promotional opportunities for themselves and their employees.
- The value of the company is related to Topgrading. The 3rd edition of Topgrading has 40 case studies and CEOs state in their own words that Topgrading made the company more successful.
- Showing reduced costs of mis-hires makes all managers want to be better Topgraders.
Read the measurement sections in the 3rd edition of Topgrading. They thoroughly explain hiring steps #1 (Establish a baseline – percent hiring success prior to Topgrading) and #12 (Conduct annual measurement to show Topgrading success…or not). These sections are on pages 62 –77 (Step #1) and 175 – 178 (Step #12). Experiment with the four useful Topgrading Calculators. Someone involved with measuring hiring/promoting success can “play with” these revealing calculators to quickly develop an intuitive sense of how powerful Topgrading is…and why measurement is so crucial. It’s simple to perform the calculations that will anchor your talent perspective in reality. All of these calculators are at www.TopgradingCalculators.com, where you can enter your information and get the results immediately. The four Topgrading Calculators are:
- Baseline Hiring Success Calculator. Calculate your pre-Topgrading percentage of high performers hired and promoted. (This is a quick version of hiring Step #1).
- Topgrading Talent Projection Calculator. Calculate how many people you’ll have to hire and fire (the mis-hires, the low performers) in order to achieve 90% A-players hired, given your present success rate. (This usually shows a LOT of mis-hires before there is a good hire/high performer, making you want to calculate just how costly those mishires are.)
- Topgrading Cost of Mis-Hires Calculator. Calculate your typical cost of mis-hires, and your typical number of wasted hours sweeping up after a mis-hire. (This calculator makes filling out the Cost of Mis-Hires Form a breeze.)
- Topgrading Organizational Cost of Mis-Hires Calculator. Calculate the costs of mis-hires in money and time, depending entirely upon your success rate. Using these estimates, pinpoint how much it will cost you to “live with” those underperformers (to replace underperformers with your current methods) with your current success rate which is probably low. You will see how much money and time you’ll save if you replace underperformers with Topgrading methods.
Summary: It’s important to accurately measure your Topgrading success. It’s simple if done the recommended way. Following are more detailed methods to measure hiring and promoting success, and to estimate the ROI of transitioning to Topgrading methods.
For Real: Measure Your Success Hiring Prior to Topgrading: Your Baseline
Topgraders eventually measure success hiring/promoting for all jobs; even jobs where Topgrading methods are not used. Why? Topgrading results for even the entry level positions are spectacular. Even if Topgrading is started at high levels within the organization, you’ll want to eventually roll it out for all jobs.
For purposes of explanation, let’s use a scenario that assumes there are 20 managers in your organization. Suppose you are the CEO and you have completed performance reviews for your managers. You believe that 50% (10 of them) are high performers. Not satisfied with 50%, you decide to attend a Topgrading workshop with your 2 vice presidents to launch Topgrading. If I asked you, “What’s your success hiring and promoting the people in those 20 managerial jobs?” you would likely tell me 50%, but you’d probably be wrong. Why? A couple of your managers are new, and you probably should not count them as definitely good hires until they’ve been on the job one year. Also, you had a bunch of mishires and mis-promotions and you replaced them…so 50% is not your success rate; it’s your percent high performers after that revolving door. More on that later.
So, the first measurement step is to validly measure your baseline, your success rate hiring or promoting for whatever group you focus on. This is your measurement of your pre-Topgrading success. For purposes of explanation, let’s discuss how to measure success for managers.
In our example, you’re the CEO and you have 20 managers, some hired externally and some promoted. Make a list of all managers hired and promoted during the 2+ year period from 3 years ago until one year ago. Why? Because you need managers to be on the job at least one year before you determine whether they were a good hire (high performer or potential to be a high performer), or a mis-hire (not a high performer and do not show the potential to become one). You can go back as many years as you want in order to have larger numbers of managers included in your research. Just remember you want everyone included to have been in the job for at least one year before you rate them a good hire or mis-hire.
Suppose you go through your records and see that 20 managers were hired/promoted from 4 years ago to one year ago. Write down their name, job title, and the date they were hired or promoted. Rate their performance today:
- Pull out performance appraisal records
- Ask the hiring manager and HR or peers who have worked closely with the manager to rate the person either a 1)High Performer/High Performer Potential; or 2) Mis-Hire.
Question: What if the person was hired as a sales rep 3 years ago, and was rated a high performer in that job, but 1 ½ years ago was promoted to Sales Manager not using Topgrading and has failed in that job?
Answer: Count that person a mistake, a mis-promotion into management.
Suppose currently you have information on 20 managers hired pre-Topgrading and 6 managers are now rated High Performer or High Performer Potential, leaving 14 who are rated Mis-Hire (i.e., mis- promotion or not a High Performer). Take the total number of High Performers/High Potential Performers (6) and divide by the total number of managers hired/promoted (20), and Your pre-Topgrading management hiring success rate has been 30%.
Common Mistake: Recall that “revolving door” scenario? It’s such a common mistake; let’s explore it a bit more. Companies sometimes say things like, “The day we started to roll out Topgrading we had 20 managers and half were High Performers, so our pre-Topgrading hiring/promoting success was 50%.” Probably not! To make the point, let me demonstrate how only a 10% success rate can convert to 50% high performers today. Let’s suppose that years ago when the first 20 managers were hired or promoted, 18 were terrible performers, a 10% success rate. Darn! Suppose all 18 were fired, and only 10% of the 18 replacements were successful (2), so you’re up to 4 high performers (20%) on the team. Suppose the 16 low performers were fired and 10% (2) turned out to be a high performer. Now you’re up to 6 high performers and…you get the picture! In this case there was a revolving door (at warp speed) but just because the company had 50% High Performers the day they launched Topgrading does not mean it experienced a 50% hiring success rate. It got to 50% despite a 10% success rate by replacing 90% low performers time and time again.
For Real: Measure Success Hiring and/or Promoting Since Topgrading Methods Were Used
As soon as managers are trained and begin using Topgrading methods, start recording all management hires and promotions for the next year, and then wait one full year after each manager was hired before measuring their performance. At that time you should rate them High Performer/High Performer Potential or Mis-hire/mis-promoted (not a High Performer). So if it is January, 2014 and you hire 1 manager, you can measure that person’s performance in January, 2015.
- retain them by creating a terrific culture within their organization,
- reward high performance (with promotions and pay),
- redeploy underperformers into jobs in which they are high performers,
- replace underperformers, and
- do not replace some underperformers who are released, finding that 5 A Players can do the work better than 2 As, 5 Bs, and 2 C Players, for example.
For Real: Chart Declining Costs of Mis-Hires
If you used the Topgrading Calculators, you’ve estimated the costs of mis-hiring people who are your current employees. These are not scientific calculations but are usually the management team’s best guesses. Now it’s time to make those guesses more educated.
Measure the costs of every mis-hire and mis-promotion. Use the Topgrading Cost of Mis- Hire Form by sitting down with the hiring manager and one or two others who worked closely with the mis-hire to perform a very thorough performance review. Most companies start by doing this just with managers…and later add individual contributors, and gradually go down through the company as Topgrading takes hold. The motivation to continue these measurements comes from looking at the declining costs (in money and time) of mis-hires year after year. If the company is growing, the numbers have to be altered to reflect information that is more meaningful and measurable, like the average cost of mis-hire per employee, for example. Then add the chart to your company dashboard.
Every manager uses the Topgrading Cost of Mis-Hires Form (Step #1) whenever there is a mishire, and these costs of mis-hires can be aggregated across the company, and disclosed to all managers annually.
For Real: Measure Success Using Topgrading Online Solutions (TOLS, including the Topgrading Snapshot)
Measure prescreening time pre-TOLS and since using TOLS. Early indications are that someone screening from Topgrading Snapshots cuts screening time 90% (whether or not an Applicant Tracking System – ATS – is used).
Listen to this Topgrading Tip from Brad Smart on audio