How To Measure Quality of Hires (and Promotions)

Why Measure Success Hiring and Promoting People?

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 rigorously measure hiring/promoting success.

Measuring results is necessary for accountability: Topgraders measure hiring/promoting success, and CEOs say they hold themself and their managers responsible for achieving 90% high performers on their team. When hiring 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!”).

Measurement provides an opportunity for senior management to reinforce the commitment to Topgrading. Outstanding Topgraders are not only praised, but are typically so successful they earn promotions faster.

How To Measure Hiring/Promoting Success

The simplest way is to ask, “What percent of the people you hired in recent years turned out to be the expected high performers, what you paid for … and the only other category is mis-hire because you did not hire the expected high performer.”  The parallel question is,  “What percent of people promoted in recent years turned out to be the expected high performers?”    This is a guestimate, but a useful start.  In a conference I asked just the #1 HR executives at just the largest 100 companies in the world and the results:  20% success hiring and 25% success promoting people.  Huh?!  That’s right – the biggest, most sophisticated companies in the world find that 80% of the people they hire and 75% of the people they promote turn out to be disappointments.

Measure the state of your business with the four useful Topgrading Calculators.  It’s simple to perform the calculations that will anchor your talent perspective in reality. All of these calculators can be found at www.TopgradingCalculators.com, where you can enter your information and get the results immediately. The four Topgrading Calculators are:

  1. Baseline Hiring Success Calculator. Calculate your pre-Topgrading percentage of high performers hired and promoted.  Most companies conclude that less than 1/3 of the people they hire or promote turn out to be the expected high performers, A Players.
  2. 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.   Be prepared to be shocked; companies with a typical 25% – 30% success rate would have to endure a horrific revolving door of replacing mis-hires to finally achieve 90% A Players.
  3. Topgrading Cost of Mis-Hires Calculator. The Topgrading Cost of Mis-Hire Form is the most quoted and referenced.  Common estimates of employee turnover using superficial methods are in the $5,000 – $10,000 range but do NOT include the biggest cost – the cost of wasted or missed business opportunities. And we estimate something no other approach does – wasted hours for team members sweeping up after a mis-hire.  Be prepared to see your own estimates of cost and time wasted shock you. Our research shows the average cost of a $100,000 sales rep or mid manager is about $500,000 and the average cost of a $500,000 executive is about $5 million.
  4. Topgrading Organizational Cost of Mis-Hires Calculator. Calculate the costs of mis-hires in money and time wasted, company-wide, depending entirely upon your estimates of your success rate.  Using these estimates, pinpoint how much it will cost your company to “live with” those underperformers (and to replace underperformers with your current methods) .  You will see how much money and time you’ll save if you replace under performers with Topgrading methods.  It will be obvious to any CEO or head of HR that the strategic goals of the company will almost certainly not be achieved given then present poor hiring methods and results.

Measure Your Success Hiring Prior to Topgrading: Your Baseline

The Topgrading Calculator baseline measurement at www.TopgradingCalculators.com simply asks for your success rate.  Let’s elaborate a bit with an exercise.   Topgraders measure hiring success for all jobs, but for the sake of simplicity, let’s just use management ranks.  Suppose you have 20 managers, some hired externally and some promoted. Make a list of all managers hired and promoted during the 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 does 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.

Write down their name, job title, and the date they were hired or promoted.    Rate their performance today, but only if they’ve been on the job at least one year.

  • 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.

Suppose 5 managers are now rated High Performer/High Performer Potential, leaving 15 who are chronically lesser performers. They are rated Mis-Hire. Your pre-Topgrading  management hiring success rate, your baseline, is 25% success hiring/promoting.

Common Mistake: 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! Suppose, just to make the point, you had only a 10% success rate hiring and you hired, fired, hired, fired, etc. over the years and today have 50% high performers.  Your pre-Topgrading hiring success rate is 10%, not 50%.  Don’t forget – be sure the manager was hired/promoted at least one year ago to be included in your data.

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, 2015 and you hire one manager this year, you can measure that person’s performance starting in January, 2016.

Measure Percent of High Performers

You might launch Topgrading and find that 90% of the people hired/promoted turn out to be high performers, A Players.  Good for you!  But … if there were only 30% high performers in the company, it might take years for you to finally achieve the goal of Topgrading:  90% high performers throughout the company.

Theoretically you could enjoy 90% success hiring/promoting and yet have a team of 20% high performers.  Huh?! How?  Again – theoretically – your top managers are so lousy they can’t retain high performers – who quit – leaving mostly low performers.

As you can see, measuring success hiring/promoting sounds simple but it’s a little more complicated.  So far we’ve discussed measuring your baseline and measuring your success hiring/promoting, but you won’t be happy with your hiring/promoting methods until you’ve packed your team (management or the whole company) with 90%+ high performers.  So Topgraders annually perform talent reviews and boil the results down to this:  percent High Performers (A Players) or High Performer Potential (Potential A Player).

Measureing High Performers

Measure Declining Costs of Mis-Hires

If you used the Topgrading Calculators (above), you’ve estimated the costs of mis-hiring people who are your current employees.  These 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 (at www.TopgradingCalculators.com) 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. Then add the chart to your company dashboard.

Every manager uses the Topgrading Cost of Mis-Hires Form whenever there is a mis-hire, and these costs of mis-hires can be aggregated across the company, and disclosed to all managers annually.

Cost of hiring wrong employee

In real life the results are always the same: Topgraders increase their percent high performers hired and promoted, from 25% to 50%, 60%, and steadily toward 90%, and the high costs of mis-hires goes down, down, down year after year. Every manager sitting with HR to analyze the costs of every mis-hire by reviewing the total hiring file on the mis‐hire or mis-promotion, sees that cutting corners on Topgrading methods is foolish because it is too costly.

Measure Success Using Topgrading Online Solutions
(TOLS, including the Topgrading Snapshot)

Topgrading Online Solutions (TOLS) are the online tools that make screening a breeze.  The Topgrading Snapshot, for example, persuades low performing candidates with hyped resumes to drop out (good!).  And in literally seconds, by glancing at a Snapshot, HR or a hiring manager can see if the candidate is a job hopper or not, see their full compensation history, and see amazingly accurate guesses as to how all bosses would rate their overall performance.  TOLS are tools intended to save a lot of screening time and make screening candidates so good that much better candidates are interviewed in person.  So, let’s measure TOLS!

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).
  • Improvement in quality of those screened on the phone and later interviewed in person.  One key number is percent of those phone screened who are invited in for face‐to-face interviews.  Another is the percent interviewed in person who are offered a job.
  • Turnover rates before and since using TOLS to hire entry-level jobs.
  • Hiring/promoting success (as described above). Companies so new to Topgrading that they don’t perform the Topgrading hiring steps beyond screening candidates for interviews (i.e., they don’t conduct Topgrading Interviews or reference checks organized by candidates), should still measure hiring/promoting success pre-TOLS and since using TOLS using the methods explained above.  There will definitely be an improvement in hiring and promoting, which will motivate management to learn more Topgrading steps, like how to conduct the Topgrading Interview.

Measure Lower Headcount Needs

Typical teams, pre-Topgrading, consist of 3 A Players, 6 B Players, and 3 C Players.  After Topgrading there are 8 As and 1 B, a 25% reduction in head count.  The really cool result is that the A team, with ¼ fewer people, vastly outperforms the former typical team. Why? Of course the A Players outperform the B’s and Cs, but there is another reason:  the As no longer have to work harder to prevent problems and they do not spend nearly as much time cleaning up the problems the Bs/Cs created.  Put differently, the eagles soar when not carrying so much low performer baggage.

A case study in the 3rd edition is Argo, and CEO Mark Watson comments that one reason the company is doing better with Topgrading is that groups perform better without the chronic low performers … that Argo needs fewer employees with Topgrading.

Another case study in the book is expecting to need 10% fewer entry employees with Topgrading, and that 10% could translate into a 50% increase in the company stock. (When the roll out is complete, their case study will be updated with these terrific results).

Measure Percent A Players Hired From Networks of Your Employees

Most executives we’ve interviewed over the decades say that their best hires come from referrals – usually referrals by their A Player employees.  On our various case studies (www.TopgradingCaseStudies.com) you’ll see the obvious, and that is that companies:

a) hire best from referrals by A Player employees
b) that measure percent As from referrals steadily increase the percent hires from referrals, and
c) that hold managers accountable for producing good referrals and hiring from them find that managers allocate their precious time to using social media, lunches, and phone calls to stay in touch with A Players who might work for the company.

This measurement is unlike the others in that not only the percent A Players hired from networks is measured but so is the Topgrading method – the percent of all hires coming from managers building and maintaining their networks.  This relates to …

Measure Follow Through on Topgrading Methods

This is the latest, and perhaps one of the most important, measurements.  Don’t just measure results, measure whether Topgrading methods are used and see that Topgrading activities correlate highly with improved hiring/promoting results.  For example, many Topgrading companies now measure:
a) whether Job Scorecards really state all the accountabilities,
b) percent hires from Networks,
c) thoroughness of phone screens (online fillable interview guides can be stored)
d) whether there were 2 interviewers for tandem Topgrading Interviews
e) thoroughness of Topgrading Interviews
f) whether tandem interviewers actually gave each other feedback on their technique
g) whether all of the reference checks were done and how thorough they were (again – stored guides)
h) whether Individual Development Plans were created (and how thorough they were) soon after someone is hired … and so on.

It will come as no surprise that the best Topgrading results occur when the Topgrading processes are measured and managers are held accountable for following through on using Topgrading methods, not just achieving 90% high performers.  Where there is a mis-hire they look at the methods used and sure enough, when managers cut corners (solo, not tandem interview, 3 reference calls not 6 ,etc.) costly mis-hires are much more likely to occur.

How to Achieve 90% High Performers

All of this measurement achieves the stated purpose of motivating managers to use Topgrading methods (and not cut corners) and assuring great hiring/promoting results.   Topgraders brag that they have 75% or even 90% high performers in management and/or throughout the company. In dozens of case studies they say they:

  • Use Topgrading methods to hire and promote people,
  • Retain high performers by creating a terrific culture within their organization,
  • Reward high performance (with promotions and pay),
  • Re-deploy underperformers into jobs in which they are high performers,
  • Replace chronic underperformers who cannot be redeployed, and
  • Do not replace some underperformers who are released because they find that 5 A-Players can frequently do the work better than 2 As, 5 Bs, and 2 C Players, for example.

Conclusion:  Every Company can benefit from taking measurements that show quality of hires/promotions. When companies measure quality of hires and costs of mis-hires, they are typically appalled at their hiring failures and the staggering costs of all those mis-hires.  Topgrading has by far the most proven methods for improving hiring, with dozens of documented case studies in which hiring success more than tripled … with the results including improved company profits, the need for fewer employees, and dramatically reduced costs of mis-hires.

Published on August 5, 2014

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