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Recruitment & Retention

Published February 2007

Improving Quality of Hire: A Core Competitive Strategy

 

  Tod Loofbourrow

With markets growing more global every day and competition growing more intense, competing for top talent can be challenging. And it is about to get tougher.

Organizations everywhere face a looming scarcity of high-caliber talent as changes in demographic trends, lifestyles, skill shortages and other forces begin to shrink workforce talent pools and, ultimately, affect corporate performance. Remarkably, the Society for Human Resource Management's (SHRM) June 2006 "Workplace Forecast" finds 51 percent of midsize employers and 23 percent of large employers are just becoming aware of this critical issue. All, however, will need to compete more aggressively, not just in the products and services markets but in those for talent, as well.

Designing and implementing competitive strategy is central to business leadership. Companies invest significant amounts of management time in crafting product, service, and growth strategies to help them succeed in the marketplace and reward shareholders.

One of the most effective growth strategies practiced by the world's leading organizations is not simply their product or distribution strategy but their people strategy. Gartner calls this whole area "talent management," and it represents one of the areas of greatest return on time invested in all of business.

The major differentiator of high-flying organizations from also-rans is the quality of the talent they bring into their organization. I recall in great detail a 3 3.5-hour job interview I experienced 20 years ago with Microsoft's Steve Ballmer (now CEO). I was a soon-to-be college graduate. He was working with his ex-college roommate Bill Gates to grow talent at his 200-person Bellevue, Wash.-based software company.

The entire interview consisted of word problems of increasing complexity and challenge. Microsoft was looking for smart, flexible problem solvers, and the company went on to build one of the greatest success stories of the 20th century. A drive down California's Highway 101 shows the same philosophy at work today, as recruiting billboards from Google feature math problems with the implicit message of, "If you can solve this, you can be one of us."

But you don't have to be Microsoft in 1984 or Google in 2007 to attract the best talent. You need a talent management strategy that focuses on attracting and retaining the highest-quality employees for the needs of your business.

It's not enough to just fill positions quickly — it is critical to find the right talent to meet corporate goals. Measuring "quality of hire" and "best sources for quality candidates" will provide a more accurate assessment of success.

These metrics explicitly relate the recruiting process to the performance of the new hire. And in this way, recruiting is assessed not just as a stand-alone function but viewed as an integral element of a broader strategy to drive positive business results.

Quality of hire affects organizational performance at every level, and ultimately, a company's ability to compete. Bad hires are costly — a Recruiting Roundtable study found their cost can be up to twice their salary. Moreover, bad hires have the potential to disrupt a company's strategy implementation.